FRC has ‘substantive questions’ on 44% of accounts

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting, which reveals the FRC wrote to 44% of the companies it reviewed “with substantive questions about their reports.”

The FRC said 14 companies were required to restate their accounts “in instances where significant non-compliance occurred” and “frequency of restatements relating to cash flow statements remains a concern.”

The FRC outlines in the report its top 10 areas “where improvements to reporting quality are needed so users of accounts have a clearer understanding of company performance and position.”    
The FRC said: “In the last year, the FRC reviewed 216 accounts and wrote to 96 companies with substantive questions about their reports.

“Fourteen companies were required to restate their accounts in instances where significant non-compliance occurred.

“The frequency of restatements relating to cash flow statements remains a concern.
“Ahead of the 2020/21 reporting cycle, preparers will face additional demands to produce high-quality reports against the backdrop of the Covid-19 pandemic and increased economic uncertainty.

“However, the key considerations for companies when preparing their report and accounts, such as clarity, consistency, relevance and transparency, remain.

“The FRC also expects disclosure of forward-looking information that is specific to the entity and which provides insights into the board’s assessment of business prospects and the methods and assumptions underlying that assessment.
“The FRC’s upcoming monitoring of annual reports will focus on disclosures addressing risk, judgement and uncertainty in the face of the ongoing impact of Covid-19; the UK’s exit from the European Union and climate-related risks.”

The FRC’s executive director of supervision David Rule said: “Companies have a key responsibility to prepare high quality annual reports to ensure investors, shareholders and other users can make timely and informed decisions. 
“We expect companies to improve their reporting in the ‘top ten’ areas we identify.
“Given the heightened need for high-quality disclosures as a result of the Covid-19 pandemic, it is vital companies carefully consider the FRC’s findings ahead of the next reporting cycle.”