The Financial Reporting Council (FRC) has reiterated the need for high-quality disclosures from companies during periods of economic uncertainty. To support more informed decision-making, companies must ensure that investors and other stakeholders receive reliable information about a company’s financial performance and prospects.
The FRC’s Annual Review of Corporate Reporting published yesterday, performed 252 reviews of companies’ accounts and, while the overall quality of corporate reporting within the FTSE 350 had been maintained, 27 companies were required to restate aspects of their accounts.
The FRC was disappointed to find errors in cash flow statements, an area where both companies and their auditors must improve. The review also identified scope for improvement in reporting on financial instruments and deferred tax assets.
In times of economic uncertainty companies must clearly identify their principal risks, ensure these are reflected in their business strategy and disclosed in their annual report and accounts. To support better disclosures, the review includes examples of key matters companies must consider during uncertain times such as the need to disclose significant judgements in relation to going concern assessments.
FRC executive director of supervision, Sarah Rapson, said: “During periods of economic and geopolitical uncertainty it is vital that companies not only comply with relevant reporting requirements but deliver high-quality information for investors and other stakeholders. While these are challenging economic times, companies need to be agile, continually assess evolving risks and ensure these are clearly explained in their annual reports. As an improvement regulator, the FRC will be closely monitoring companies cash flow statements and other areas of reporting where we expect to see further improvements.”
The FRC will also be hosting a webinar on November 2 to discuss the key findings from this year’s annual review.
For more on the FRC.