Smaller listed companies and alternative
investment market (AIM) quoted firms find it harder to meet high
reporting standards than there FTSE 350 counterparts, the Financial
Reporting Council (FRC) has warned.

The FRC’s Financial Reporting Review Panel
(FRRP) has published the findings of its annual report which
focuses on non-compliance aspects and it is aimed at helping boards
to identify relevant issues during the coming reporting season.

The FRRP said however, it has noticed a
general increase in the quality of reporting among public and large
companies in the year to 31 March 2012.

Companies overall have improved the way they
report principal risk and uncertainties such as the reporting of
mitigating actions.

The FRRP reviewed 326 sets of reports and 130
companies were required to provide further information or

Once again this year the panel remains
concerned about the reporting of some smaller listed and AIM quoted
companies that have not yet attained the accounting proficiency of
larger companies.

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The FRRP is encouraged, though, by the
cooperation that boards of directors have offered to further make
progress in their reporting activities.

Any dispute’s the board came up against
regarding whether or not a report was complied correctly were
successfully settled without the need for the panel to bring the
case to the court and the companies adopting the FRC

It is when smaller listed companies are
involved that the panel has warned directors should not
underestimate the importance of their legal responsibility to
prepare accounts that abide to the law and accounting

Disclosure shortcomings

Under the Companies Act 2006 companies must
prepare a business review enclosed in the director’s report
containing a description of the principal risks and uncertainties
facing the organisation.

According to the FRRP’s annual report there
are shortcomings in the disclosures offered by some boards and the
panel has raised concerns over certain reporting practices.

Some companies, for example, provide bullet
point headings instead of an accurate description of the principal
risks it faces. In other instances companies do not distinguish
principal risks from uncertainties and only provide a long list of
potential risks.

In this respect the FRRP has encouraged boards
of all sizes to explain in their business reviews actions and
strategies taken to avoid those risks.

The FRRP also paid particular attention to
insurance company reports and accounts, a priority sector for the
panel because it lacks comprehensive IFRS standards and specific
reporting requirements.

The main concern for the panel lied in the
consistency and transparency of the insurer’s reporting

In particular the panel drew its attention to
the clarity of presentation of non-IFRS terminology and the
description of key accounting policies applied.

The panel also reviewed the reporting of Greek
sovereign debt held directly by the UK’s insurers in 2011
fulfilling the request of the European Securities and Markets