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The Financial Reporting Council (FRC) has published its reporting expectations for companies amidst a period of high interest rates, persistent inflation and ongoing economic uncertainty.
The most frequently raised issues identified by the FRC related to impairments, and judgements and estimates.
This reflects the ongoing economic uncertainties companies need to factor into their financial reporting and the need for detailed explanations to help users understand the positions taken.
The FRC extended its monitoring work to include reviews of directors’ remuneration reporting for a selection of ten companies.
In addition, the FRC continued with its ongoing reviews of corporate governance disclosures against the Corporate Governance Code.
As part of this the FRC reviewed 263 company reports and wrote to 112 companies with questions about their accounts.
Following FRC enquiries, 25 companies were required to restate aspects of their accounts.
Sarah Rapson, executive director of supervision, said: “During periods of economic uncertainty, it is especially vital that companies provide users of annual reports and accounts with decision-useful information. While the overall quality of company reporting we have seen remains consistent, companies should continue to familiarise themselves with FRC findings and expectations to ensure they are providing high quality disclosures.”
Mike Suffield, director, policy and insights at ACCA, added: ”FRC is right to highlight the importance of high-quality corporate reporting, especially at times of economic turbulence. The current environment of high inflation, rising costs and high interest rates depressing demand provides stern challenges to management and boards (and, indeed, to auditors) in providing clear, transparent and decision-useful information to their stakeholders.
“In this context, it’s no surprise that the FRC sees the greatest number of issues surrounding impairment, judgements and estimates. But it is also a concern to see some companies struggling with fundamental parts of the financial statements such as cash flow statements.”
