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 over another.
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 reporting.
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 explanation; and,
- 3 companies were the subject of a panel press release after having agreed to restate amounts reported in prior periods.