Corporate reporting is at a critical juncture, says ICAEW in its response to the FRC’s discussion paper. It notes that in 2019, Sir Donald Brydon’s ‘Independent Review into the Quality and Effectiveness of Audit’ led to a number of far-reaching recommendations, including a number relating to corporate reporting. These recommendations will soon be discussed as part of the forthcoming BEIS consultation paper on corporate governance and audit reform.
Also part of the prevailing landscape is the ongoing progress towards a set of international non-financial reporting standards. In particular, the IFRS Foundation’s recent sustainability reporting standards proposals and the rapid developments on this front in Europe.
“We are clearly in the midst of a period of change which could have a significant impact on the UK corporate reporting landscape,” says ICAEW’s response to the FRC. “While some of the forthcoming changes may address challenges highlighted in the FRC’s discussion paper, other challenges may remain, or even evolve.”
Further discussions to reflect all these developments could be useful at a later date, says Sarah Dunn, Technical Manager in the Financial Reporting Faculty. “However, our focus right now should be on monitoring, influencing and supporting current developments, particularly in relation to global initiatives and efforts to standardise non-financial reporting,” she says.
ICAEW’s response points out that another important consideration is how the proposed model would interact with reporting regimes internationally. “In particular, adopting a reporting regime that is radically different or incompatible with that found in other jurisdictions would present a major challenge for companies with cross border listings. We believe that when the FRC revisits the proposed model in the discussion paper, consideration should be given to how any fundamental changes to the UK reporting regime would interact at an international level,” says ICAEW’s response.
However, there are strengths in the current regime, as pointed out by members and incorporated into ICAEW’s response. “We have again heard how the annual report is considered by many to be a valuable source of information,” says ICAEW. “There is much benefit to be gained from having a single document which brings together information from across an organisation, some of which is subject to audit or assurance, all signed-off at the same time, and published regularly. The positive aspects of the current regime must not be lost when formulating proposals for change.”
Dunn points out there has also been positive feedback from the membership on the progress made in recent years towards the integration of financial and non-financial information in annual reports. Indeed, the concept of integration has been highlighted as critical to the future of corporate reporting.
She says: “While there is still more to be done to improve the integration of financial and non-financial information in annual reports, we must be careful not to lose sight of the progress that has been made to date. It is important to build on recent experience and the best practice that has emerged, rather than trying to reinvent the wheel.”
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