facebook
Live
Live

A matter of principles: The future of corporate reporting – discussion paper

About this consultation

The UK’s Financial Reporting Council (FRC) has issued a discussion paper proposing The future of corporate reporting founded on a principles-based framework. The paper outlines a model for what FRC describe as “a more agile approach to corporate reporting which challenges existing thinking about how companies can more effectively meet the information needs of investors and other stakeholders.”
 
FRC highlight that companies and society face significant challenges, heightened by the Covid-19 pandemic, and that stakeholders are increasingly interested in companies’ wider actions and the reporting that supports these.

The paper considers a common criticism that corporate annual reports are too lengthy, and that information is difficult to access. FRC intends that its proposals are tested with stakeholders and stimulate discussion about the future landscape of corporate reporting.
 
Please view FRC’s supporting literature review and the results of the FRC’s initial survey.

Background

The UK’s FRC regulate auditors, accountants and actuaries, and set the UK’s Corporate Governance and Stewardship Codes. It seeks to promote transparency and integrity in business, with its work aimed at investors and others who rely on company reports, audit and corporate risk management.

The FRC is working towards becoming the Audit Reporting and Governance Authority (ARGA), which will require primary legislation. It is looking to implement the recommendations of the Independent Review of the FRC; The Competition and Markets Authority (CMA) review; and Sir Donald Brydon’s review into the quality and effectiveness of audit, using six workstreams as one holistic programme.

The six workstreams are: setting up the new regulator; audit scope & regulation; corporate regulation; corporate reporting; corporate governance; and market reform. Activities include a new governance structure, due in January 2021; enhanced complaints handling processes; and engagement with prospective signatories of the revised UK Stewardship Code, which took effect from 2020, with reporting due in 2021.

Proposed changes

The FRC discussion paper proposals include:

  • unbundling the existing purpose, content, and intended audiences of the current annual report by moving to a network of interconnected reports;
  • a new common set of principles that applies to all types of corporate reporting;
  • objective-driven reports that accommodate the interests of a wider group of stakeholders, rather than the perceived needs of a single set of users;
  • embracing the opportunities available through technology to improve the accessibility of corporate reporting; and
  • a model that enables reporting that is flexible and responsive to changing demands and circumstances.

FRC believes that these proposals are consistent with the themes in the independent Kingman and Brydon reviews. FRC assert that to build trust in the system for corporate reporting, it needs to be supported by a framework for audit and assurance and regulation.

Consultation questions

We invite IOSH members to send us comments on FRC’s discussion paper on The future of corporate reporting to consultation@iosh.com, to help inform an IOSH submission, by 05 January 2021.

IOSH members wishing to also respond individually to the FRC directly can do so by completing the FRC survey or by sending comments to futurereporting@frc.org.uk by 05 February 2021.