‘Quality of Corporate Reporting Generally Good’
The Financial Reporting Review Panel has published its annual report based on findings from the Panel’s review of reports and accounts in the year to 31 March 2011 in which 301 sets of accounts were reviewed, 141 companies were approached by the Panel for further information or explanation, and 4 companies were the subject of a Panel press release. The Panel found the general quality of corporate reporting to be good.
The Role of the Panel is to examine the annual accounts of public and large private companies to see whether they comply with the requirements of the Companies Act 2006, including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
It continues to have concerns about the quality of reports and accounts of some smaller listed and AIM quoted companies where there is still room for improvement.
Where breaches of the Act are discovered, the Panel seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs.
Where a company’s accounts or directors’ report are defective in a material respect the Panel will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Panel is empowered to make an application to the court under section 456 of the Act for an order for revision. To date no court applications have been made.
“Narrative reporting was a key area of interest for the Panel during the year. Although some poor practice is still seen, the Panel was particularly pleased to note widespread improvement in the description of principal risks and uncertainties in the business review included within the directors’ report,” the Financial Reporting Council said.
Boards are also now more likely to describe the actions they are taking to mitigate the effects of risks and uncertainties which the Panel believes is required in order to satisfy the objectives of the review.
The Chairman of the Panel is Bill Knight and the Deputy Chairmen, David Lindsell and Joanna Osborne. There are currently 35 other Panel members drawn from a broad spectrum of commerce and the professions. Individual cases are normally dealt with by specially constituted Groups of 5 or more members.
Commenting on the findings and recommendations, Bill Knight said: “We are very pleased that descriptions of risks and uncertainties are improving. We are also looking to the balance and fairness of the business review – we applaud honest straightforward reporting which reflects the good and the less good aspects of the company’s performance.”