On 11 October 2016 the FRC published its advice to audit
committee chairs and finance directors of listed companies,
highlighting key issues and improvements it considers can be made
to annual reports in the 2016 reporting season.
The advice includes:
A call for annual reports to be more user-friendly and
information to be communicated more clearly in a clear and concise
Encouragement to consider a broad range of factors when
determining the principal risks and uncertainties facing the
business and performing their analysis for the viability statement,
for example cyber security and climate change. Companies should
also provide clear disclosure of why the period of assessment
selected is appropriate, what qualifications and assumptions were
made, and how the underlying analysis was performed.
In light of the Brexit referendum result, the FRC expects
boards to provide increasingly company-specific disclosures with
quantification of effects as the economic and political effects of
the referendum become more certain.
The relationship between alternative performance measures
(e.g., IFRS or UK GAAP) should be clearly explained.
Business model reporting should provide clarity of explanations
of how the company makes money and what differentiates it from its
There should be a clear link between the business model and the
revenue recognition policies to be disclosed.
Rationalisation of tax strategies should be clearly described
in the report and accounts, including where tax is paid, a
consideration on sustainability, and any material risks to which
this gives rise.
Dividend disclosures should detail how dividend policies
operate in practice and how these policies may be impacted by risks
and capital management decisions facing the company.
More informative reporting about specific actions taken by
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