Newsflash – What makes a good Annual Report and Accounts?

December 2022

The FRC has published new guidance material, What makes a good Annual Report and Accounts? Written by the FRC’s Corporate Reporting Review team based on their supervision of annual reporting, this material sets out the FRC’s view of the attributes associated with a high quality annual report and accounts. It is part of the FRC’s ongoing What makes a Good… series.

The FRC explains that the principles in the publication can be applied to the entirety of the annual report and accounts and apply to all companies, whether listed or unlisted, of any size and applying any accounting framework. The report is aimed at preparers, company directors and company secretaries.

Attributes of a good annual report and accounts

The FRC explains that a high quality ARA:

  • complies with relevant accounting standards, laws and regulations, and codes;
  • is responsive to the needs of stakeholders in an accessible way; and
  • demonstrates the corporate reporting principles and effective communication characteristics outlined in this publication.

In order to achieve this, the report sets out corporate reporting principles and effective communication characteristics. The corporate reporting principles the FRC sets out, following the mnemonic ACCOUNT, are:

  • Accurate
  • Connected and consistent
  • Complete
  • On-time
  • Unbiased
  • Navigable
  • Transparent

The communication characteristics the FRC sets out (“the 4Cs”) are:

  • Company specific
  • Clear, concise and understandable
  • Clutter free and relevant
  • Comparable

The FRC also draws out a selection of examples of good quality reporting explaining the features of disclosure it encourages other companies to consider. These range from examples of good linkage in the strategic report, to how the business model generates value for shareholders, to financial reporting examples of impairment disclosure, decision-making around provisions and tailored accounting policies.


With regard to materiality, the FRC explains that:

“Materiality is the bedrock of corporate reporting. It is a fundamental concept embedded in accounting frameworks and the primary tool that helps companies to focus on key matters for them and their stakeholders. Materiality informs the breadth and depth of what needs to be included in the full ARA.

Information is material if omitting it or misstating it could influence the decisions and assessments of ARA users. Materiality applies to all transactions, balances and disclosures – both numerical and textual – in the ARA, not just those transactions affecting the accounts.”

In addition the report makes clear that information can be material, either on the basis of quantitative factors, qualitative factors or both. Materiality should be determined in the context of the entity’s business. Whether a particular piece of information is material will vary between entities.

With stakeholder focus on climate disclosure, the FRC also encourages companies to disclose the basis they have used to assess the materiality of climate-related disclosures, which will help readers to understand whether materiality considerations have driven omissions of recommended disclosures.

Regulatory considerations

Throughout the report, the FRC draws out some of the features that can attract its regulatory attention or comment:

  • Evidence of qualitative factors being used to increase quantitative materiality for certain transactions, events or conditions.
  • To be confident of its accuracy, management should consider both the sufficiency and effectiveness of the controls over information prepared solely for the ARA as perceived material errors may attract regulatory enquiry.
  • Inadequate descriptions of the nature of certain events and transactions or poor explanation of the accounting applied.
  • The use of the ARA as a marketing tool if that undermines the need for the ARA to be fair and balanced.
  • Regulators may raise unnecessary questions if it is difficult to locate information in relation to a material transaction, event or other condition.
  • Accounting policies that lack clarity, are not company or transaction specific, or are inconsistent with other information in the ARA.
  • Excessive duplication of material across the ARA that obscures other decision relevant information.
  • ARAs that fail to explain how APMs have been calculated or how they reconcile to GAAP measures.

The FRC’s publication can be found here.

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