FRC annual review of corporate reporting for 2019/20

The Financial Reporting Council (FRC) has published its annual review of corporate reporting for 2019/2020.

The Review sets out the FRC Corporate Reporting Review team’s key findings following its review of annual reports and accounts for reporting periods to 31 October 2019.

In relation to narrative reporting, the FRC says that the topics most often raised with companies when reviewing annual reports include:

• Strategic reports – Issues that the Review highlights that could be improved are the comprehensiveness of the strategic report and whether it gives a fair review. Other areas for improvement include ensuring non-financial information reporting requirements are appropriately addressed and ensuring that the principal risks and uncertainties do not omit risks that merit inclusion (for example, climate change).
• Alternative performance measures (APMs) – Issues commonly raised include in relation to reconciliations, prominence and consistency. The Review also notes that the FRC expects issuers to continue to follow the ESMA Guidelines on APMs after the end of the Brexit transition period.

The FRC says that the topics most often raised with companies in the context of financial statements include issues in relation to judgements and estimates; impairment; revenue from contracts with customers; use of financial instruments; cash flow statements; provisions and contingencies; fair value measurement and business combinations.

In relation to the FRC’s monitoring priorities for the 2020/2021, it says that these are risks, judgements and uncertainties in light of the ongoing Covid-19 pandemic, the potential consequences of the UK’s exit from the EU, and climate-related risks.