The regulator says it has achieved further efficiency savings during 2017/18 and reached its target level of reserves earlier than planned, so it is not seeking any additional contribution in 2018/19.

Staff costs over the year were lower than originally planned because recruitment to some roles has taken longer than anticipated.

The FRC’s overall funding requirement will increase by 1% in 2018/19, as a result of an additional funding requirement from the accountancy profession to cover additional work as competent authority for audit and for its new role in monitoring local public audit. The main increase in the budget for 2018/19 is the projected costs of the proposed audit firm monitoring approach. 

The total amount of the preparers levy for 2018/19 will be £14.8m. In addition to this the FRC will aim to collect the UK contribution to the funding of the International Accounting Standards Board, totalling £0.9m in 2018/19. The FRC is proposing to reduce the minimum fee and the levy rates for levy bands one to five by 2.5% for organisations within the preparers levy funding group.

While the FRC says it will not be increasing levies this time, it states: ‘Looking ahead into the second and third years of the 2018/21 strategy period, it is possible that we will need additional resources in response to new expectations from government and others for the monitoring of corporate governance and in response to the UK departure from the EU. We will continue to consult annually on our budget and funding.

‘As we gain clarity about the implications of Brexit for assessments of equivalence and adequacy of overseas regulation, we will evolve and adapt our processes in these areas. This may have implications for our resourcing needs.’

As regards its plan of work for the coming year, the FRC says it will consult on the future direction of the UK stewardship code in late 2018. There will be a greater focus on companies’ reporting on actions to support the long-term success of the company and to have regard to their impact on wider society, and more consideration of how technology can revolutionise corporate reporting, and whether new technology can enhance the FRC’s own monitoring programme.

Turning to Brexit, the strategy states: ‘We are supporting the government as it explores options for the UK’s accounting framework following its departure from the EU. We will ensure the UK is positioned to maintain high standards of accounting by preparing the framework for any UK endorsement process for international accounting standards.

‘Key to comparability will be retaining IFRS. At the same time, we must understand how the UK’s interests are impacted by new standards under IFRS and use that understanding to exert influence on the development of those standards and in deciding how they are adopted. If, in exceptional circumstances and subject to some strict criteria, there are aspects that need to be adopted differently in the UK we believe these should be considered.’

The FRC says that in its previous strategy it set the aim that by 2019 at least 90% of FTSE 350 audits will require no more than limited improvements. The annual report on developments in audit to be published in 2019 will include an assessment of whether this aim has been achieved.

The FRC states: ‘The 90% target is a waypoint not an end point. Over the strategy period we will consider increasing the target percentage and broaden its application, paying particular attention to financial services audits.’

The deadline for comments on the FRC’s strategic priorities, budget and funding for 2018/21 is 28 February 2018. The FRC will publish its finalised strategy, budget and levies in April 2018.

Strategy 2018/21 Draft Budget and Levy Proposals 2018/19 is here.