FRC Lab report on section 172 statements

The FRC's Financial Reporting Lab has published a guidance note on section 172 statements.

The Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860) introduced a range of stakeholder reporting measures, including a requirement for certain companies to include in their strategic report a statement that describes how the directors of the company have had regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006 when performing their duty under section 172 (see our briefing for further detail).

The FRC Lab guidance note seeks to help companies consider what content to include in a section 172 statement, how to present it and how to facilitate the process of preparing the statement.

Key points discussed in the guidance note include:

• Content – The statement should explain why particular stakeholders are considered to be key; why particular engagement methods were effective; and the key decisions and planned actions in light of engagement and feedback. There should be appropriate linking to the company’s strategy and business model. The report also says that the statement should include discussion of the board’s oversight of stakeholder engagement.
• Presentation – The statement should be clearly labelled, and cross-refer to further detail in other parts of the annual report. Case studies of significant decisions taken during the year are also helpful.
• Process – Board agendas and board papers can be used to include helpful prompts on stakeholder-related issues.