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The Financial Reporting Council (FRC) has published a summary of its findings from its latest review of structured digital reporting.
Under the Transparency Rules, listed companies are required to produce their annual reports in XHTML, a structured electronic format, and to tag their financial statements in accordance with an approved taxonomy (for more information on these requirements, see our snapshot here).
Since the introduction of these requirements in 2021, the FRC has reviewed compliance by companies regularly and produced reports to help companies improve.
In its latest report, the FRC noted that most annual reports are well structured and comply with the requirements. It has, however, identified a number of areas where improvements can be made, including:
- More granular tagging – the FRC notes that disclosures often need more than one tag, but companies use only one tag or just a top-level tag. The FRC encourages companies to be more granular in the tags used and to refer to the FCA's list of mandatory tags as part of their review process.
- Accounting meaning – when deciding which tag to use, companies should use the one which reflects the accounting meaning of the disclosure, rather than selecting the tag based on the label, to ensure that the tag correctly matches the accounting concept being disclosed.
- Custom extensions – this occurs when companies create their own custom, company-specific tag (called an extension) even though there is an appropriate standard tag. This makes it harder for users of the reports to analyse and compare data. This issue was also highlighted by the FRC in its last review; and
- Earnings per share (EPS) – the FRC observes mistakes in relation to EPS, usually caused by incorrect scaling (where the scale used for EPS was the same as for other numbers in a table, even though EPS is usually expressed in pence or cents).
The FRC also noted that around 10% of companies filed their structured reports late and that a number of companies did not file the report at the NSM. The FRC recommends that companies build a final check into their procedures to ensure that the report has been uploaded to, and is accessible on, the NSM.
Alongside the fuller review, the FRC has produced a two-page factsheet summarising the 10 key issues identified and proposed solutions.
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