Narrative reporting, particularly the business
review, is demanded more attention from the UK Financial Reporting
Review Panel (FRRP).
The FRRP’s annual report notes that during the
past year, companies were often asked to provide more information
to help explain apparent inconsistencies between narrative
information in the front of the report and the audited accounts in
the back end.
In response, the panel intends to focus on
ways to clearly link the narrative and accounts.
“Our attention to narrative reporting reflects
changes in the law and an increasing call for reports and accounts
to tell a coherent story, with an eye to the future as well as the
past,” FRRP chairman Bill Knight said.
The past year saw improvements in management
descriptions of significant accounting policies and improvements in
the disclosure of areas most affected by management judgement.
The FRRP noted particular improvement during
the period of economic uncertainty, which made it more important
for management to explain the selection of one accounting option
However, improvements could be made to the
quality of reporting by smaller listed companies, which lack the
levels of expertise of their larger peers.
The FRRP is an independent regulator
responsible for promoting high quality corporate governance and
The panel examines annual accounts of public
and large private companies to determine whether they comply with
the Companies Act 2006.
The FRRP annual report is based on the panel’s
review of accounts in the year to 31 March 2010.
During this time:
- 308 sets of accounts were reviewed;
- 146 companies were approached for further information or
- 3 companies were the subject of a panel press release after
having agreed to restate amounts reported in prior periods.