UK FRC Consults on Non-Financial Reporting Guidance
The UK Financial Reporting Council (FRC) is consulting with regards to amendments to the guidance on the strategic report. The purpose of this is to take into account all the new regulations with reference to non-financial reporting that effective for financial periods starting from or after January 1, 2017.
The UK FRC says that ‘pragmatic approach’ has been taken so that the proposed amendments enhance the requirements of the pre-existing strategic report, which was issued in the year 2014, integrating additional content present in the new set of regulations rather than duplicating. The guidance is still non-mandatory but encourages best practice.
The proposed amendments reflect the enhanced disclosure requirements which certain large companies are required to comply and therefore make disclosures regarding social matters, employees, human rights, environment and anti-bribery and anti-corruption matters. The guidance also encourages companies to make disclosures regarding how broader stakeholders are considered when taking important decisions in connection with the company’s long term success.
The FRC has said that the amendments reflect its plans to improve the usefulness of section 172 of the Companies Act 2006. The section 172 requires a director to consider many issues like interests of company’s stakeholders, impact of any decision and non-financial matters that are important to be pursued for the long term success of the company. The FRC is also encouraging all the firms, to provide better information on how companies have fulfilled this duty in order to improve accountability to shareholders and other stakeholders.
FRC’s executive director of corporate governance and reporting, Paul George said in a statement that high quality reporting plays a key role in enhancing transparency and trust in business. The amendments proposed to the guidance in respect of the strategic report encourages businesses to take into consideration the impact of their activities connected with stakeholders and the factors that play a key role in the company’s success in the long term.
He further said that they are encouraging all types of companies to make non-financial reporting an essential part of the annual report and to disclose information that not only helps the company’s shareholders but also the wider community in understanding about how directors have had regard to their obligations as per Section 172 of the Companies Act 2006.