Newsflash – FRC publishes future of corporate reporting discussion paper

October 2020

The FRC has issued a thought leadership paper exploring ideas for changes to the system of corporate reporting with a view to making it more effective and engaging for all those with an interest in a company. The objective of the paper is to challenge the status quo and to set out proposals for a new corporate reporting model.

The paper proposes that there should be a ‘reporting network’ centred around a stakeholder-neutral Business Report designed to enable users to understand how the company creates long-term value in accordance with its stated purpose. In addition, the ‘reporting network’ would include two other core reports – the full Financial Statements and a new Public Interest Report. The objective of the Public Interest Report is to provide information that enables users to understand how the company views its obligations in respect of the public interest, how it has measured its performance against those obligations and to provide information on future prospects in this area.

The intention is that the objective of each report should drive its content and that the report should create an active dialogue between a company and its stakeholders about issues that matter to them. In a similar vein, materiality will be judged by reference to the communication objective of the each report. The paper suggests that a single definition of materiality is not appropriate for all reports.

It is hoped that clearly identified objectives for each report will help direct regulatory decisions on required content and corporate decisions on the information to include when meeting regulatory requirements. Under the proposals, each of the reports would be founded on common principles for corporate reporting to maintain cohesiveness across different disclosures (system level attributes), establish information adequacy (report level attributes), and promote effective communication (content communication principles).

The paper is available here and the FRC is inviting comments by 5 February 2021.

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