FRC's Letter to Investors

In early April 2017, the Financial Reporting Council released their annual letter to investors outlining key areas they feel will be of interest, while encouraging them to engage more with companies on the relevance of the information that is provided to them.

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Within the letter, an overview of the aim of the annual report is included alongside some recent developments across different areas of the report.

Strategic Report
Within the Strategic Report, the FRC highlights their recent publications around business model reporting and the clarity that companies should be using, firstly when explaining how they make money and secondly how they are different from their peers. It then goes on to discuss Alternative Performance Measure, which now apply under the European Securities and Markets Authority's (ESMA) ‘Guidelines on Alternative Performance Measures’, and the required clarity of such disclosures.

Moving on to Risk reporting and the viability statement, the FRC highlights their requests to companies around clarity on the period assessed, what qualifications and assumptions were made and how the analysis was performed. Finally, in terms of the Strategic Report it looks at Brexit reporting and their suggested matters for Board consideration in their July press release ‘Reminders for half-yearly and annual financial reports following the EU referendum’.

Governance
With relation to Governance reporting, the letter discusses Comply or Explain in relation to companies adherence to the Corporate Governance Code. It asks that those who do not comply provide clear and specific explanations around rationale, background and mitigating activities. Investors are encouraged to engage with companies when they feel that there has not been a sufficient explanation.

There are also details highlighted around the Audit Committee Report and Financial Statement disclosures such as tax, dividends, low interest rates, IFRS and accounting policies.

A key theme highlighted throughout the letter is around ensuring that investors feel that companies are providing them with clear and transparent information, and where they have diverted from recommendations, a clear rationale is provided.

It’s clear that telling your story needs to be focused with the end user in mind. It’s important to understand what your investors are looking for and engage with them through your report and website as part of your wider corporate communications plans.

For help getting your messages across, why not talk to a member of our Think team — we’d love to help.