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The Financial Reporting Council (FRC) has highlighted that companies need to provide “better explanations” on balance sheet movements in their interim reporting.
The news comes ahead of the 2021 interim reporting season, in which the FRC reviewed the reports of 20 quoted companies across a range of industries to assess the quality of their reporting.
Overall, the regulator said it was “pleased” with the quality of interim reports, with most companies taking into account its Covid-19 recommendations to “enhance their disclosures”, particularly in relation to going concern and the statement of cash flows.
For significant events and transactions taking place during the interim period, such as impairments, many companies provided detailed explanations and other helpful information normally reserved for the annual reports and accounts.
David Rule, executive director of supervision, FRC, said: “Given the ongoing impact of the Covid-19 pandemic, the 2021 interim reporting season is likely to be one of the most important and consequential for users of corporate reports.
“While it is pleasing that many companies followed the FRC’s Covid-19 guidance, there is still room for further improvement particularly around providing better and clearer explanations of the impact of significant events on financial statements.”
Andrew Ninian, director for stewardship and corporate governance at the investment association, added: “Investors rely on high-quality interim reporting, particularly in times of uncertainty, to support companies and take informed decisions on their long-term future.
“We welcome the findings of the Financial Reporting Council’s report and encourage companies to heed the best practice examples and make improvements to their reporting where necessary.”
