Posted in Reporting, News on 6 March 2017 By Kay Kayachith, Consultant
Our latest roundup of reporting changes affecting both public and private listed companies.
1. The FRC is due to review the UK Corporate Governance Code. It is speculated that the Code will include stipulations on corporate culture, rather than just the Board Effectiveness Guidance as has been previously announced.
Why? In light of issues with corporate culture, limited disclosure of succession planning processes, and the government’s recent Green Paper on executive pay, the FRC wants to reassess how the Code could be strengthened to build trust with investors and wider stakeholders.
When? TBD – the FRC is currently consulting on changes with proposals due later in 2017.
Who will it affect? UK FTSE 350 companies based on a comply or explain basis.
2. In November 2016, the government put out a paper called the Corporate Governance Reform Green Paper that covered three main areas:
- Executive pay – the link to long-term company performance and pay
- Strengthening the employee, customer and supplier voice
- Corporate governance in the UK's largest privately-held businesses
Why? With recent governance issues, the government wants to ensure that the UK’s governance framework remains fit for purpose.
When? The options set out in the Green Paper are designed to stimulate debate and the government is currently collecting responses from businesses, employees, investors and the general public.
Who will it affect? All public and private UK-listed companies.
3. The EU introduced the Non-Financial Reporting Directive in 2014. Many of the provisions in the Directive reflect those that are already required for 2013 Strategic Report regulations concerning sustainability.
However, reporters will now also be asked to report on bribery and corruption matters for the first time. Reporters will also be asked to discuss not just policies related to, for example, environmental matters, but also associated principal risks and non-financial KPIs.
Why? Reporting has evolved from purely financial reporting to the inclusion of comprehensive non-financial metrics that give investors and wider stakeholders a better understanding of the sustainability and longer-term prospects of a company.
When? The regulations were implemented in the UK on 6 December 2016 and apply to financial years starting on or after 1 January 2017. The UK legislation allows for boundaries for companies to voluntarily comply with the EU requirements.
Who will it affect? The requirements apply to Public Interest Entities (for example listed companies) with more than 500 employees and which meet the large company size definition in the Companies Act 2006.
4. The European Securities and Markets Authority (ESMA) has set out the requirement that companies use inline Extensible Business Reporting Language (XBRL) to report their company information.
Why? The digital format will allow users such as investors, analysts and auditors to carry out software-supported analysis and comparison of large amounts of financial information.
When? 1st January 2020 onwards.
Who will it affect? What this will really mean for reporters remains unclear (particularly given the imminent departure of the UK from the EU).
The FRC is consulting on research areas to focus on in 2017. Some areas of focus considered are risk and viability reporting and how corporate communications as a whole could work better for investors and wider stakeholders.
Our recent FTSE SmallCap & AIM event in London focused on how these companies can use the annual report as an opportunity to better communicate their investment story to the market.
The Investor Relations Society's 30th conference, Access, Board, Careers: An ABC of IR provided valuable insight to those in the IR profession, or those liaising with IROs, such as analysts and fund managers.
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