The letter reflects findings from the FRC’s Annual Review of Corporate Reporting 2018/19 and the scope for companies to improve their reporting to address matters of “increasing concern” to investors and enhance public trust in business.
The FRC expects companies to improve the quality reporting of forward-looking information, the potential impact of emerging risks on future business strategy, the carrying value of assets and the recognition of liabilities.
It said failure to report on these “crucial” `areas “undermines” trust in business and can lead to the conclusion that management is either unaware of their potential impact, is being “opaque, or is not managing them effectively”.
The FRC said it welcomes some improvement in key disclosures of critical judgements and estimates and alternative performance measures (APMs) as reflected in companies’ strategic reports.
Paul George, executive director of corporate governance and reporting at the FRC, said: “Investors and the general public rightly expect financial reports to be fair, balanced and understandable.
“This is particularly important in periods of uncertainty where heightened transparency is expected. High-quality reporting by companies, including candid disclosure of the risks they face, supports trust in business.”