The future of corporate reporting

In this article, we discuss the feedback given during the consultation period of the FRC's Future of Corporate Reporting project. Find out the key areas of discussion and their potential impacts on your company's future reporting.

The project aims to challenge existing thinking about corporate reporting and consider how companies should better meet the information needs of shareholders and other stakeholders.

This is a massive opportunity to overhaul and rethink the approach taken to Annual Reports, and improve the disclosures in corporate reporting and how that information is accessed.

The FRC released a discussion paper outlining their proposal on the future of corporate reporting, and have also carried out a consultation period where responses from businesses and individuals could be submitted.

A key concept in the paper is the reporting network. The FRC proposal includes three main reports – the business report, public interest report and financial statements – and provision for additional supporting reports.

How could this affect corporate reporting?

This would move your company's Annual Report from a single document to a network of interconnected reports. In theory, this modular approach to reporting should make it easier for your stakeholders to locate the information that they are interested in, and also allows for reports to be more focused, with static and standing data being able to be reported on separately.

In the responses given during the consultation period, a number of concerns have been raised around the practicalities of a reporting network. At the moment, your corporate reporting team is focused on producing the Annual Report. As it is a single, standalone document, you can ensure that the narrative and content is consistent.

What are the implications?

In the reporting network, making sure that the narrative is consistent and that there aren't discrepancies across the reports will be more challenging. Additionally, it could lead to a splintering of your team that works on corporate reporting, with each report being worked on in isolation. It is possible that keeping repetition of information low would become a challenge as each report would need to include wider context for its disclosures, which would be covered by other reports.

In the FRC's Discussion Paper, they envision three main reports, with the network centred on the business report. The FRC describes the business report as similar to the existing Strategic Report in Annual Reports that helps a reader understand how the business creates long-term value. Some of the responses to the consultation argue that a better approach would be to make one of the reports in the network a summary core report. This report would give a comprehensive overview of the content across the network of reports and be the way that a user navigates to the information that they are interested in.

What are the advantages?

The core report approach would address some of the previous concerns that have been raised. By having a summary report, the linkage between reports could be improved, and ensure that there is a joined-up narrative across the reports. Additionally, this will allow for collaboration within the team that works on corporate reporting and also will ensure alignment to the integrated reporting initiative

It is clear that the current approach to corporate reporting could be improved to meet stakeholders' information needs.

You may have noticed that Annual Reports are overloaded with disclosures and content, and are growing in length year on year. It is not uncommon now to see an Annual Report over 200 pages long. This makes it challenging and intimidating for stakeholders to look through to get the information that they need. The reporting network is a strong solution to this challenge. However, for it to succeed, it needs to go beyond simply dividing up the existing Annual Report into different sections, but foster an approach that takes advantage of the opportunity that a network of reports offers. For it to succeed, the linkage and navigation between the different reports in the network will be critical, and there needs to be a summary core report that gives an overview of the content and narrative across the network.

Whilst this is still in consultation mode, we feel it's important to continue to monitor how this could develop, due to the potential impact on the future of corporate reporting. For more information on how we can help with your reporting, we would love to hear from you.