15 Sep 2013
The UK’s Financial Reporting Council (FRC) has confirmed the increasing influence of the framework for integrated reporting (IR) by explicitly referencing the IR principles in its guidance on the ‘strategic report’.
The strategic report is only one element of the UK government’s update to narrative reporting regulations, and is intended to ensure that the needs of shareholders are met with relevant, clear information.
The FRC’s non-mandatory, persuasive draft guidance proposes only “relatively modest” changes to existing requirements, but the tone of encouragement towards “experimentation” and “innovation” in the annual report is unmistakeable.
Much of the FRC’s draft guidance is characteristic of the Integrated Reporting framework, with its emphasis on viewing the annual report as a whole and striving for greater cohesion. There are particularly striking similarities in its description of the strategic report as a step beyond simple compliance, towards future orientation.
Crucially, the FRC does not interpret the requirement for a strategic report as a requirement for a high-level summary of information found elsewhere in the report. The emphasis is on clear communication of and links between objectives and information.
The exposure draft suggests that companies cut clutter with a “core and supplementary” approach to information. This approach is also advocated by the Financial Reporting Lab, following its research with companies and investors.
Under the proposed requirements, companies are encouraged to make sure that information is:
"It's important for the success of reporting that the solutions are market-led,” said Mark O'Sullivan, PwC Corporate Reporting director, commenting on the similarities between the FRC draft guidance and the IR framework. ,“There's no point being prescriptive, especially at this stage, because it will stifle innovation. But light-touch regulation that encourages companies to adopt the IR principles is appropriate, and it's good to see that governments are beginning to pick up on the framework as they move to improve reporting overall."