The Financial Reporting Council (FRC) held an online event on Wednesday 11 November that aimed to advance the debate on the future of corporate reporting, not only here in the UK but also globally.
The webinar was held in the wake of a thought-leadership paper published by the FRC last month after stakeholders claimed corporate reporting was no longer meeting their expectations. The paper hosts a series of proposals to move towards a more agile approach to corporate reporting which is to be reached in approximately 10 years’ time.
Key takeaways and recommendations
The Director of Narrative Reporting, Deepa Ravel, gave a brief overview of the paper and its key proposals. Ravel stated the two aims of the new model were to:
- challenge existing thinking about how companies can more effectively meet the information needs of their investors and other stakeholders, and
- recognise the complete suite of company reports now and in the future.
The COVID-19 pandemic has heightened the debate about the role that companies have in society. With increasing pressure for companies to be ‘doing the right thing’, stakeholders subsequently want to see this reported clearly. The paper considers a common criticism that corporate reporting is no longer fit for purpose as annual reports are too long, and information is difficult to access.
Therefore, the FRC believes a new approach to corporate reporting is needed and put forward the following proposals:
- The creation of a reporting network that is comprised of a series of interconnected reports.
- A new common set of principles that applies to all types of corporate reporting.
- Communication objective-driven reports that accommodate the interests of a wider group of stakeholders, rather than the perceived needs of a single set of users.
- A shift away from the single definition of materiality that we have in financial statements today into a different lens of materiality.
- Levelling the playing field of reporting on non-financial and financial information while keeping the interconnectivity between the two.
- Testing the idea of a public interest report that provides more comprehensive information on a company’s impacts.
- Embracing the opportunities available through technology to improve the accessibility of corporate reporting and move away from paper-based reporting.
- A model that enables reporting that is flexible and responsive to changing demands and circumstances.
These proposals were designed with stakeholders by the FRC and an advisory group to help shape the debate around what the future of corporate reporting should look like.
Going forward, the FRC is welcoming feedback on the proposals, which the webinar initiated through a Q&A session at the end of the presentation. Inclusive invitations to virtual round tables and formal submissions of comment letters were also alluded to as the event aimed to rebuild trust in the corporate reporting system.
The Luminous view
We are very excited about and fully supportive of the FRC's proposals on the future of corporate reporting. In particular, we believe that technology will play a pivotal role in shaping how annual reports are communicated and engaged with.
If you would like to discuss how Luminous can help you with your annual report, please get in touch.