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By All Accounts

What makes a good annual report and accounts?

Author: Lucy Dilley

Published: 03 Apr 2023

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Lucy Dilley sets out the characteristics of a high-quality annual report and accounts.

The annual report and accounts (ARA) is the cornerstone of corporate reporting. It should provide investors with clear and relevant information on the company’s performance and prospects to help them make informed investment decisions and promote effective stewardship. That’s why it is vital, and in the public interest, that ARAs are of high quality.

Preparing a high-quality ARA can be a challenging task due to increasing reporting requirements and the complexity of most businesses. It is further complicated by the different information needs of stakeholders. The FRC’s recent What Makes a Good Annual Report and Accounts publication complements its existing Thematic Reviews, its FRC Lab reports, and its Accounting and Reporting Policy publications, which are designed to support preparers, audit committee chairs and company secretaries in meeting this challenge. 

The publication, which forms part of the FRC’s What Makes a Good series, draws out key points from previous FRC documents and sets out its view, as a regulator that promotes improvement, of the high-level characteristics a good quality ARA possesses. It does not provide information on how to meet GAAP, legislation or code requirements. 

Set against a backdrop of materiality, it identifies these attributes using a framework of corporate reporting principles and the 4Cs of effective communication (see more on this below): 

Company specific; 

Clear, concise and understandable; 

Clutter free and relevant; and 


Where possible, the report uses published examples to demonstrate these attributes.

Company specific

High quality ARAs are tailored to the company. They are not generic or boilerplate, rather they include insights into the board’s decision making, explain the company’s business model in jargon free language and offer company specific accounting policies.

Clear, concise, and understandable

Clear, concise, and understandable ARA’s communicate information efficiently using straightforward language and short sentences.

Clutter free and relevant

Only relevant information is included in a good quality ARA. Duplication should be avoided, instead cross references to relevant information contained elsewhere in the ARA are provided. 


ARAs should be comparable to company information published in previous years. They should also be comparable to the ARAs of peers. Sector practices and policies as well as information disclosed by peer group companies should be considered when assessing comparability.

Where auditor materiality is disclosed in the auditor’s report, users are likely to assume that the company has used a similar quantitative materiality in their approach to the preparation of the accounts. When this is not the case, the company may wish to disclose details of their assessment

Regulator view


Materiality is a fundamental concept of corporate reporting. It informs the breadth and depth of content across the whole ARA. Materiality is relevant to all transactions, balances and disclosures, from the narrative reports to the financial statements. 

As reporting requirements grow, it is increasingly important that ARAs only include information that is relevant and material.

Information is likely to be relevant to users if it has predictive value, has confirmatory value or provides information in respect of the organisation’s ability to create (or lose) value. 

Information is material if omitting it or misstating it could influence the decisions and assessments of ARA users. 

Determining whether something is material is a matter of judgement. Quantitative and qualitative factors must be considered as should the item’s nature and context. 

In particular, the context of the entity’s business and any relevant legal or regulatory guidance must be considered in determining the materiality of a specific piece of information. Whether a particular piece of information is material will vary between entities.

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The FRC Lab is currently undertaking the Materiality in practice project. This project aims to understand how companies develop, assess and use materiality. It will also consider how enhancements to disclosures about materiality processes might assist investors. Outputs are expected to be published throughout 2023.

A principles-based framework

High quality ARAs take ACCOUNT of the Corporate reporting principles and the 4Cs of effective communication. It is important that materiality as well as the size and complexity of the business is considered in applying these principles. 

The FRC’s What Makes a Good Annual Report and Accounts publication assumes that an ARA meets the requirements of relevant GAAP, legislation and codes. However, there is overlap between matters of compliance and the principles identified.

Corporate reporting principles are the overarching qualitative characteristics a good ARA possesses, namely it should be:


Connected and consistent; 


On time;


Navigable; and



An accurate ARA is free from material misstatement and error. Determining whether an ARA is accurate is a matter of judgement as errors and misstatements must be considered in the context of both materiality and the entity’s specific circumstances. 

Connected and consistent

A good ARA tells the story of the business. For this story to make sense, different parts of the ARA should be connected and consistent. Connected ARAs link information on the same or a related subject matter together to enable users to understand their interaction. For instance, a business’s culture, purpose, values, and strategy should be linked together. Consistency refers to the ARA being internally consistent and consistent with other information produced by the company.


A complete ARA includes all the positive and negative material information that is required to understand the transactions the company has entered into, as well as its development, future prospects, liquidity status, financial performance and financial position. An ARA’s completeness is a matter of judgement as materiality must be applied in determining the information to include. Assessing completeness of the strategic report and the corporate governance statement is challenging as content requirements in these areas are less prescriptive.

On time

ARAs must be published by the relevant dates set out in legislation and they should include timely information. As a rule, the older the information, the less useful it is. However, it is important that ARA quality is not compromised by compressing reporting timetables. 


Information is unbiased if it is balanced. Balanced ARAs should refer to both positive and negative aspects of the company’s performance, position and future prospects as well as the risks and opportunities the company faces. This means that the ARA should provide an open and honest account of the company’s activities, performance and future prospects. 


ARAs should be accessible. When ARAs are available on a company’s website, they should be easy to locate and downloadable in their entirety. A navigable ARA is searchable and includes detailed contents pages, navigation panes, clear titles and description, specific cross references and hyperlinked cross references. 


An ARA should represent faithfully the economic substance of the transactions that the company has entered into. Significant judgements taken should be disclosed and audited and unaudited information should be clearly labelled as such. Additional disclosures over and above any stated requirements might be necessary for users to fully understand the transactions entered into. 

4Cs of effective communication

Delivering information in a way that enables users to identify relevant information and understand the linkages between different parts of the ARA allows users to make well informed decisions. The 4Cs of effective communication (see above) help achieve this.

The ARA may attract regulatory attention if its use as a marketing tool undermines the need for the ARA to be fair and balanced

Regulator view

When used by preparers, audit committee chairs and company secretaries, the FRC’s ‘What Makes a Good Annual Report and Accounts’ publication is a helpful tool in providing useful reports and accounts for stakeholders. 

It provides detailed guidance on each of the attributes alongside published examples, information on the issues identified in ARAs in the FRC’s role as regulator, and an easily accessible summary infographic, can be found on the FRC website.

Lucy Dilley, Case Officer, Corporate Reporting Review, Financial Reporting Council