The case for simplified reporting

Jamie Tomlin, chair of the LCCA Technical committee and technical director of Crowe U.K.LLP makes the case for reporting to be simplified to a core set of criteria easily applicable to all companies.

February 2021

Can I make a plea for simplification?

I am not making a plea for less disclosure, or for a shorter annual report, but to simplify knowing which requirements apply to which entities. The proliferation in recent years of the scope of accounting, auditing, or reporting requirements is daunting.

Corporate reporting has different requirements for micro-entities, small entities, medium-sized entities and large entities. Further complicated by the interaction for plcs, ineligible companies (and groups), quoted companies and traded companies (and quite possibly other criteria).

More recent developments for “front end” reporting have introduced requirements that are linked, sometimes directly, sometimes not, to the Companies Act accounting size or to individual thresholds.

For example, employee numbers for disclosure of engagement with employees directly links.

Whereas companies with even greater numbers of employees are caught by the disclosure of private company corporate governance arrangements, another threshold to get to grips with. 

If I then add in the additional requirements for companies which are included in a market, be it the “full market” of the London Stock Exchange or others, such as Aim, determining what needs to be included in the annual report becomes an exercise in its own right.

The world is evolving, and I am supportive of the annual report playing its part in the wider development of what is expected or desired in behaviour, that there are benefits to society by requiring companies to report, and explain, their contribution to the economy, environmental issues, social and stakeholder matters and similar.

Are preparers and users being appropriately served by this proliferation?

Do users really appreciate why engagement with employees is given in one company, but another, which in all other respects but its staff numbers is the same, has no comment? How much resource is spent in trying to determine who is captured by a new requirement?

Does this get monitored to identify when a company may fall into scope or does this only get identified by the auditor (if at all!) on review, with consequences for the quality of disclosures that then follows?

Quality reporting can only be made where sufficient understanding of the requirements exists and the preparer is able to devote the time to compiling their report, commentary, and explanation. If this is not built into the annual report process the risk of weak reporting intensifies and serves to benefit no one. 

I am fully supportive of a graduated approach, with smaller private companies having fewer requirements, but having established a core set of size criteria, can we please limit any requirements to these, with no further proliferation. Or better still, can we have less differentiation?