On 31 October 2016, the FRC published a report following its
review of certain aspects of tax reporting of 33 pre-informed FTSE
350 companies' annual reports and accounts. The objective of
the review was to encourage more transparent reporting of the
relationship between tax charges and accounting profit and the
factors that could affect that relationship in the future. The
report sets out the FRC's principal findings and examples of
good practice in three areas: tax in strategic reports; effective
tax rate (ETR) reconciliation disclosures; and uncertainties
relating to tax liabilities and assets.
The FRC found evidence of improvement in the transparency of tax
disclosures included in strategic reports and in the quality of
information provided in ETR reconciliations but identified areas
for improvement in disclosures concerning tax uncertainties by
explaining the bases for recognition and measurement. The FRC
encourages companies to:
Consider carefully whether there are significant judgements and
estimation uncertainties relating to tax. Where estimation
uncertainties are repeated unchanged year on year, the FRC will
question whether the disclosure of quantified risk specifically
relating to the next year is clear.
Appraise what specific information about judgements and
estimation uncertainties would be most helpful to users of the
accounts. The FRC's Financial Reporting Lab found that
investors value an understanding of the judgements made and
estimations applied by management.
The FRC commented that it will continue to challenge companies
that do not disclose the amount of uncertain tax provisions when
these are subject to risk of material change in the following year.
The audit of uncertain tax provisions is an area of particular
focus of the FRC's audit monitoring activities for
Stephen discusses the what, why and where in respect of open book accounting in public sector contracts. He also considers the practical drafting steps when drafting open book clauses in contracts and the possible remedies to include in the drafting.
It is true that accountants are well ahead of most other professions when it comes to risk management and certainly, the "big four" have had in place risk management processes and dedicated resources far earlier than solicitors.
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