The quality of corporate reporting across FTSE 350 companies has been maintained during the 2024/25 monitoring cycle, according to the latest Annual Review of Corporate Reporting by the Financial Reporting Council (FRC).

However, the regulator highlighted a continuing quality gap between companies in the FTSE 350 and others, with the majority of restatements continuing to arise in companies outside the FTSE 350. The FRC is undertaking a thematic review focusing specifically on reporting by UK smaller listed companies.

The regulator’s analysis found that a lower proportion of reviews resulted in queries being raised with companies compared with previous years. Overall restatements prompted by reviews fell compared to the previous three years and the number of restatements affecting profit has also reduced.

Impairment of assets

Despite these positive findings, reporting issues persist and, for the third consecutive year, impairment of assets emerged as the issue that resulted in the most substantive enquiries. Issues were identified in 10% of companies reviewed, which was down from 12% in 2023/24, however, the FRC’s enquiries did not result in any restatements this year, compared with four in the previous year.

Many of our queries could have been avoided by clearer, more comprehensive impairment disclosures, or better connectivity between these disclosures and other areas of the financial statements,” the review says. Inconsistency of information between financial statements and other sections of the report and accounts are identified as a key theme in the review.

Cash flow statements

At the same time, cash flow statements continue to present challenges, resulting in the second highest number of substantive queries (9% of companies reviewed, down from 11% in 2023/24.)  Cash flow statement errors also remain one of the most common reasons for companies making a prior year restatement, although the number of companies restating their cash flow statement fell to 12 from 16 last year.

The number of substantive questions raised in relation to financial instruments was similar to last year at 9% of companies reviewed, down from 10% in 2023/24. The topic remains in third place in the list of top 10 issues. In 2024/25, three companies restated their primary statements as a result of these enquiries (2023/24: nil). All restatements related to inappropriate application of the offsetting requirements for financial instruments.

“The type of questions we raised is similar to previous years, although a number of our queries in 2024/25 related to relatively unusual or more complex transactions. Our questions could often have been avoided by companies including more complete and specific disclosure of relevant accounting policies and financial risks,” the review says.

Robust pre-issuance reviews

Many common areas of challenge could be identified through sufficiently robust pre-issuance reviews, the FRC says, while stressing that such reviews remain a key expectation for companies' oversight processes.

Sally Baker, ICAEW’s Head of Corporate Reporting Strategy, says: “It is promising to see that the number of reviews resulting in substantive queries and restatements has reduced compared to previous years. That said, it remains concerning to see the same topics persistently topping the list of substantive queries.

“With that in mind we welcome the FRC's upcoming thematic reviews. We hope it will get under the skin of why cash flow statements continue to be problematic and uncover the reasons behind why there are more restatements by companies outside the FTSE 350.”

Looking ahead to the 2025/26 reporting season, companies are encouraged to take a step back and consider the annual report and accounts as a whole, while ensuring a focus on improving explanations of significant judgements and estimates, including disclosure of key inputs and assumptions.

“It is important that the annual report tells a credible, consistent and connected story. A cohesive annual report will enable companies to provide meaningful information to investors and other users,” Baker says.

Although changes to IFRS accounting standards for the coming reporting season are relatively minor, more extensive changes loom including the implementation of IFRS 18. Companies may wish to start considering the effects these will have on their reporting, the FRC urges.

• Download the Annual Review of Corporate Reporting

ICAEW reporting guidance

ICAEW has produced a number of related ICAEW guides to help preparers of reports with the areas flagged up as most problematic by the review. These include factsheets on the impairment of assets under FRS 102 and IFRS Accounting Standards and a guide highlighting common pitfalls and tips on performing robust reviews of cash flow statements.

On financial instruments, ICAEW has produced factsheets on accounting for financial instruments under FRS 102 and IFRS Accounting Standards. ICAEW has also produced a dedicated guide on reporting requirements relating to the disclosure of key judgements and sources of estimation uncertainty.