The review from the FRC highlights that while the quality of financial reporting is generally good, there is definitely room for improvement.
Most companies comply well with the accounting framework and there are improvements in narrative reporting, through the introduction of the strategic report, however queries were raised on around a third of the 192 companies assessed by the FRC in their review.
The FRC encourage companies to be more balanced in reporting their performance. ‘Failure to acknowledge when something has not gone well, excessive use of underlying profit figures and inappropriate use of alternative performance measures’ are all found in numerous reports, creating a lack of trust and allowing the quality of corporate reporting to be subverted.
The Executive Director for Corporate Governance and Reporting at the FRC, Paul George, said, “Our goal is to deliver a framework for corporate reporting that fosters and supports continuous improvement in the quality of reporting by those we regulate, and which provides investors and other stakeholders with information they can understand and rely on.
Our work on corporate culture this year highlighted that stakeholders and society in general have a vested interest in healthy corporate values, attitudes and behaviours that lead to sustainable growth and long term economic success. High quality corporate reporting can contribute to improved trust in business, so important to a successful economy.”
Implications arising from Brexit were also highlighted, stating that there could be issues for the adoption of the financial reporting standards depending on the Government’s negotiations.