On 15 August 2017, the FRC published a consultation paper setting out draft amendments to its 2014 Guidance on the Strategic Report ("Strategic Report Guidance"). The amendments are not intended to be a fundamental review, but instead set out to:
- reflect the new disclosure requirements arising from the UK implementation of the Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups ("EU Non-Financial Reporting Directive"), which are effective for periods beginning on or after 1 January 2017;
- enhance the link between the purpose of the strategic report and the matters that directors should have regard to under section 172 Companies Act 2006; and
- make targeted improvements to certain areas of the Strategic Report Guidance to reflect key developments in corporate reporting.
The proposed amendments to the Strategic Report Guidance include, among other things:
- changes to sections 4 (purpose) and 7 (content elements) to strengthen the link between the purpose of the strategic report and the matters to which directors should have regard under section 172. Amendments to section 7 also aim to encourage companies to consider matters that may impact the value of the company over the longer term and to place more emphasis on how value is generated;
- changes to section 5 (materiality) which seek to clarify the use of the term "material" within the Strategic Report Guidance, to enhance the focus on broader, non-financial matters that may impact the business over the longer term and to clarify the scope of the derogation from the general requirement to disclose material information;
- enhancements to the principles in section 6 (communication principles) to encourage entities to better integrate related information in their annual reports and to communicate relevant information that will enable shareholders to assess the factors that may have an impact on the long-term success of the business.
The FRC is requesting comments by 24 October 2017.
The full text can be accessed here:
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