FRC delays strategic report guidance update
The Financial Reporting Council (FRC) is to delay publication of its amended guidance on the strategic report pending the government’s announcement of legislative changes in respect of reporting on section 172 of the Companies Act, the directors’ duty to promote the success of the company
6 Dec 2017
The amended guidance was subject to a consultation in August. At the time, the regulator’s intention was to incorporate the non-financial reporting regulations into the updated version of the strategic report guidance, and enhance the link between the strategic report and the directors’ section 172 duty to promote the success of the company.
The non-financial reporting regulations implement the EU Directive as regards disclosure of non-financial and diversity information by certain large undertakings and groups, and became effective for financial years starting on or after 1 January 2017.
Since the publication of the consultation, the government has announced that it will be introducing legislative changes in respect of reporting on section 172.
The FRC says it is likely that these changes, expected in March 2018, will result in an amendment to the existing strategic report requirements and further amendments to the guidance will be required. Consequently, the FRC now intends to finalise the guidance after the government publishes its legislative changes in 2018.
The regulator states: ‘Nevertheless, the FRC remains committed to promoting better reporting in respect of section 172 and it encourages boards to continue to develop their thinking in this critical area. Anticipated amendments to the corporate governance code will require directors to consider the interests of wider stakeholders on a comply or explain basis.’
The FRC has also published some frequently asked questions about non-financial reporting to assist companies with implementation. These cover who is required to provide information, the additional disclosures for quoted companies, how to define ‘impact’, disclosures around due diligence and business relationships, and the auditors’ responsibilities in relation to non-financial reporting.
Report by Pat Sweet