UK companies prepare for longer
half-yearly reports

The introduction of new half-yearly
reports is likely to produce significant changes in transparency
requirements and the detail of communication between UK companies
and capital market participants, according to a KPMG UK study.

New half-yearly report requirements are about to come into
effect, under the International Accounting Standard (IAS) 34
Interim Financial Reporting, implemented in the UK from 20 January
2007. Companies with a March year-end will release their interim
results under the new rules later this month. The survey was
conducted to assess the impact that the new IAS 34 requirements had
on UK fully listed companies. It looked at 25 companies in Germany,
where the new standard was implemented earlier, and at six examples
of the first UK companies to apply the new requirements.

According to the KPMG study, the length of UK half-yearly reports
ranged from 11 to 24 pages, which was shorter than the reports of
German companies where page numbers ranged from 20 to 86 pages.
Additional observations revealed that the condensed set of
financial statements of UK companies averaged nine pages, while
German companies averaged 19 pages. Financial information also
varied by company and sector, however financial institutions
provided more extensive disclosures. This increase in length of
half-yearly reports is similar to what happened when the length and
complexity of annual reports increased due to the introduction of
IFRS in 2005.

KPMG accounting partner David Little-ford said the challenge for
companies is to ensure that greater length translates into better
quality reports. “The flexibility to present more focused
disclosure in half-yearly financial reports than in the longer
annual financial statements make it essential that companies devote
the necessary effort to preparing this important element of their
communication cycle,” he said.

He warned that UK companies should be prepared to make more
disclosures in half-yearly reports than in the past. “Given that
the deadline for publication is down from 90 days to two months,
this may need careful planning,” Littleford advised.

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The new half-yearly reports include an interim management report
and a condensed financial statement. They also feature a narrative
section on financial information that is supposed to provide a fair
review of the important events of the past six months, as well as a
focus on the future.