Minister gives outline of Government thinking on the future of narrative reporting
UPDATE 19 September 2011: The Government has now published its proposals on narrative reporting, as we discuss in this post.
ICSA‘s Chartered Secretary magazine reported here on 22 July 2011 on comments made by Ed Davey about the future of company narrative reporting. Mr Davey, who is the Minister with responsibility for company law and corporate governance at the Department of Business, Innovation and Skills (BIS), indicated that the present requirements for a company’s annual report will be changed, with the narrative report being split into two distinct parts:
- A Strategic Report; and
- An Annual Directors’ Statement.
Mr Davey is quoted as saying that:
“We are proposing to divide the current narrative report into two documents: a Strategic Report and an Annual Directors’ Statement. The Strategic Report will, as its name implies, be strategic. It will be a short document, aimed at shareholders, in which the business tells its story. It will be the one stop shop for anyone wanting to know the key facts about a company. It should be a truly integrated report that shows how the company’s financial results are linked to its strategy, business model and long-term risks and opportunities – including environmental and social issues.
The second part of our proposal is something that we are calling the ‘Annual Directors’ Statement’. This will contain the detailed disclosures that companies are either required to make by law or that they provide voluntarily. In short, disclosures that are important to somebody, but not to everybody. ‘We think that this should be structured and aimed at online users. The purpose of the Annual Directors’ Statement is to improve the quality of disclosure. The rules on reporting go back to the days of steel nib pens. Of course the information must be available on request in hard copy. But the reality is the internet offers a quicker, better way for many users. I promise our new rules will recognise this.”
There is no indication in the Minister’s statement as to whether this proposed new structure will apply to all companies (presumably other than small companies) or only to quoted companies (i.e. broadly, a company whose shares are included on the UK Listing Authority Official List).
This Minister’s comments were presumably made in the context of BIS’s ongoing work on the future of narrative reporting. The BIS website corporate governance page states that the Government will seek views from business on its narrative reporting proposals by the end of July 2011.
Other work on narrative reporting is also being carried by the Financial Reporting Council; in particular, through its report “Effective Company Stewardship: Enhancing Corporate Reporting and Audit” of January 2011, and the Accounting Standards Board’s “Cutting Clutter” project, which we discuss in this post.
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