FRC Publishes Lab Report on ‘Net Debt Reconciliations’

Jack Humphrey, Regulatory journalist
September 19, 2012 /

The Financial Reporting Council (FRC) has released the Financial Reporting Lab’s (Lab) project report on ‘Net debt reconciliations (NDR)’.

The Lab worked closely with five leading companies and a range of investors in preparing the observations contained in the project report. Comments on existing company disclosure were gathered by the Lab in a series of face-to-face discussions with over thirty individuals from sixteen investment organisations.

Stephen Haddrill Chief Executive of the FRC said: “Through its work with companies and investors, the Lab has demonstrated on this project the need for clear information on net debt, and explained how such information is used by investors. We are pleased to see the Lab helping to bring a focus on information that is relevant and important to investors, and ways in which it can be presented.”

The five companies who participated in this project include: BT Group, National Grid, Royal Dutch Shell, Vodafone and Xchanging.

The Lab’s report shows how some companies are defining net debt and disclosing various cash and non-cash movements in net debt that might not otherwise be apparent from financial reports. The Lab’s work has shown that this gives investors confidence that they have understood issues related to the development of financial obligations that must be met, and issues relating to the capital structure and the enterprise value attributable to net debt versus shares.

Director of the Financial Reporting Lab, Sue Harding, said: “The overall objective of this project was to explore existing voluntary practices and to identify those that investors found to be useful. I believe that we have successfully achieved this aim, and hope this encourages other companies to consider adding or improving an existing NDR, as appropriate.”

 

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