The FRC has set out its vision for the future of corporate reporting in a new discussion paper
The Financial Reporting Council (FRC) has set out its vision for the future of corporate reporting in a new discussion paper.
The Financial Reporting Council (FRC) has produced a discussion paper that sets out a model for the future of corporate reporting based on a principles-based framework.
It proposes a network of interconnected reports centred around a stakeholder-neutral Business Report. This Business Report would provide information that enables users to understand how the company creates long-term value in accordance with its stated purpose. The FRC envisage this being similar to a concise version of the Strategic Report, including financial and non-financial information.
The paper considers a common criticism that annual reports are too long, and information difficult to access. With companies and society at large facing significant challenges, which have only been heightened by the COVID-19 pandemic, stakeholders are ever more interested in companies’ wider actions and the reporting that supports these. A more agile approach to corporate reporting is set out in the paper which challenges existing thinking about how companies can more effectively meet the information needs of investors and other stakeholders.
The proposals are designed to be tested with stakeholders and stimulate the conversation about what the future of corporate reporting should look like, including:
- unbundling the existing purpose, content, and intended audiences of the current annual report by moving to a network of interconnected reports;
- a new common set of principles that applies to all types of corporate reporting;
- objective-driven reports that accommodate the interests of a wider group of stakeholders, rather than the perceived needs of a single set of users;
- embracing the opportunities available through technology to improve the accessibility of corporate reporting; and
- a model that enables reporting that is flexible and responsive to changing demands and circumstances.
These proposals are consistent with the themes in the independent Kingman and Brydon reviews. To build trust in the system for corporate reporting, it needs to be supported by a framework for audit and assurance and regulation.
The FRC paper proposes four key attributes for the entire corporate reporting system: accessibility, connectivity, consistency and transparency. Content communication principles are also included that are applicable at an individual report level to provide guidance on how reports should be written so that they communicate effectively.
Comments on the discussion paper are invited by 5 February 2021.
The discussion paper, along with the accompanying literature review and the results of the stakeholder survey can be found here: https://www.frc.org.uk/news/october-2020/frc-publishes-future-of-corporate-reporting-discus