Year end advice from the Financial Reporting Council

A super summary of the FRC report. 

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On the 10th October 2016, the FRC produced a report based on the key areas of developments and improvements that companies should look to implement in the 2016 annual reporting season. Here we’ve listed a super summary for you.

Strategic Report

After looking into the strategic report, it is clear that investors now require all annual reports to be more user friendly to ensure that the information provided within the report is clear and concise. But, the requirement to provide a fair review - that is more comprehensive - should not be overlooked when doing so.

General improvements on the discussion of the company’s financial position, cash flows and performance are also required for 2016.

Business Model Reporting

A report by the FRC was produced at the end of October which explores the improvements to the existing practice, including how companies make money and how this differentiates them from their competitors.

Alternative Performance Measures (APM)

With an increasing focus on APMs, which are usually used as a supplement alongside IFRS or UK GAAP, The European Securities and Markets Authority published a report which provides guidelines on best practice.

Risk Reporting

The FRC are advising all companies to ensure that a wide range of risks and uncertainties are developed within reports and use cyber security and climate change as examples.

They also suggest that companies include reasoning as to why they have chosen the particular period of assessment, why this is appropriate and how the analysis was performed.

UK Referendum Result

Companies should ensure that when reporting around Brexit, that all consequences and uncertainties are considered and their impact. Boards must decide on which information should be provided to stakeholders.

Financial Statement Disclosures


The FRC stated that there needs to be more visibility of factors that are affecting tax rates and their viability. When disclosing how they account for material tax uncertainties, companies should look to explain how they both recognise and measure them. There is also a requirement for companies to acknowledge the scrutiny of their tax strategies.


The requirements and suggestions for improvement for this years dividend reporting is based around the Financial Reporting Lab’s report released last year.

Low Interest Rates

Companies should consider the impact of low interest rates, ensuring that the valuation of their long term assets and liabilities are accurate. Companies may also need to provide information on potential impacts through sensitivity analysis.

Critical Judgements and Estimates

Should include all judgements made by the Board and their effects on financial statements. Companies should consider whether qualitative disclosures are required to allow users of the accounts to understand the potential effect of estimates.

Accounting Policies

There is a continuous need to improve on the disclosure of accounting policies. There should be a clear link between both the sources of income described in the business model and also the revenue recognition process.

Developments in IFRS

The International Accounting Standards Board has published 3 standards that will become effective within the next few years. These are IFRS 15 and  IFRS 9 effective from the period beginning 1 January 2018 and IFRS 16 effective from the period beginning 1 January 2019. Companies should be providing information on the progress of these standards and disclose the likely impacts of them.

There are also recent updates around IAS 7 statement of cash flows standard that explains changes in a company’s financing obligations over the period.

Developments in GAAP

Companies should review their current financial information in relations to the standards that can be applied to ‘individual financial statements of entities within a group’  such as FRS 101 Reduced Disclosure Framework and also FRS 102 the Financial Reporting Standard.

In order to take advantage of reduced disclosure options from FRS 101 and FRS 102, shareholders must be notified in writing. This requirement may be removed, but the FRC will advise and finalise this amendment in December 2016.

Remuneration reporting

Reports show that investors would like to see more ‘clarity and brevity’ in remuneration reporting. GC100 and Investor Group published and updated version of their Directors’ Remuneration Reporting Guidance.

Audit Committee reporting

More information is required based on the specific actions of the Audit Committee. The Audit Committee should disclose the following issues:

  • Issues that relate to the financial statements and how they were addressed
  • The nature of interaction with the FRC’s Corporate Reporting Review team
  • If the audit has been reviewed by the FRC, the auditors should discuss the findings and consider whether they are significant. The findings must be discussed and actions must be planned.

The FRC has produced guidance for audit committees with their Audit Quality Practice Aid for Audit Committees.

For more information on how we can help you with the content of your annual report then speak with our Think Team.