FRC annual review of corporate reporting for 2022/23

The Financial Reporting Council (FRC) has published its annual review of corporate reporting for 2022/23. The review sets out the findings of the FRC's corporate reporting review (CRR) team on the 2022/2023 reporting season and its expectations for the upcoming reporting season.

According to the review, companies are grappling with issues relating to interest rate rises amidst persistent inflation, resulting changes in consumer behaviour and limited economic growth, as well as uncertainties arising from climate change and the transition to a greener economy. Generally, the review found that the standard of reporting has been maintained, notwithstanding these challenges.

The review:

• discloses that the CRR team reviewed just over 260 companies, 112 of which were contacted for further information and explanations (slightly up on the 2021/2022 review cycle); a similar number of companies in this review season as compared to the last are required to refer to these CRR enquiries in their next annual report; and

• sets out the top ten most frequent issues in relation to which the CRR team raised a substantive question with companies, with impairment of assets being the most common.

The FRC extended its review this year to cover directors' remuneration reports (DRRs) for the first time. The FRC looked at the DRRs published by ten companies and as a result wrote to nine of these companies. Most of the points raised with these companies were in relation to the clarity of targets and achieved performance. The DRR review process will be continued next year, with a larger sample group.

The quality of reporting amongst large private companies is increasingly of interest to the FRC in the light of the proposed new reporting requirements for companies with a high number of employees and turnover (see our briefing for further details). The FRC is due to publish its thematic review on this in early 2024.

The review also notes the FRC's disappointment that the government is yet to lay the necessary primary legislation to affect its transition to the Audit and Governance Authority (ARGA) – see our blog post here for the status of the audit and corporate governance reform programme. Pending this legislative step, the FRC continues to focus on the changes it can implement under its existing remit.