The Financial Reporting Council (FRC) is consulting on amendments to its guidance on the strategic report, designed to take into account the new regulations for non-financial reporting that are effective for financial periods beginning on or after 1 January 2017
The FRC says it has taken ‘pragmatic approach’ so that the draft amendments enhance the pre-existing strategic report requirements, which were first issued in 2014, integrating additional content from the new regulations rather than duplicating. The guidance remains non-mandatory with a view to encouraging best practice.
The proposals reflect the enhanced disclosures that certain large companies are required to make in respect of the environment, employees, social matters, respect for human rights and anti-corruption and anti-bribery matters. The guidance also encourages all companies to disclose information on how boards have considered broader stakeholders when taking decisions to promote the long term success of the company.
The FRC says the proposals reflect its plans to improve the effectiveness of section 172 of the Companies Act 2006. This section requires a director to have regard to a number of matters including the long term impact of any decisions, the interests of stakeholders; and non-financial matters in pursuing their duty to promote the long term success of the company. The FRC is therefore encouraging companies, to provide better information on how companies have fulfilled this duty to improve accountability to shareholders and other stakeholders.
Paul George, FRC’s executive director of corporate governance and reporting, said: ‘High quality reporting enhances transparency and trust in business. The proposed amendments to the guidance on the strategic report encourage business to consider the impact of their activities on stakeholders and the factors that contribute to the success of the company over the longer term.
‘We encourage all companies to make non-financial reporting an integral part of the annual report and to provide information which helps shareholders and the wider community to understand how directors have had regard to their obligations under Section 172 of the Companies Act 2006.
‘The FRC is committed to improving reporting in this area since it believes that it provides an important insight into the culture of a company.’
Comments and feedback on the FRC’s exposure draft are invited by 24 October.
Draft amendments to Guidance on the Strategic Report Non-financial reporting is here.
