The Government on 18 October 2012 published the draft regulations which will effect its proposed reform of companies’ narrative reporting. We discussed the proposals in this post of September 2011 and the Government’s response to its consultation in this post of April 2012.
The draft regulations are contained in this BIS document, “The future of narrative reporting: a new structure for narrative reporting in the UK“, and the accompanying BIS press release is here. The closing date for comments on the draft regulations is 15 November 2012.
The BIS document contains this summary of the proposals:
“The draft regulations will require companies to produce a strategic report. This will be similar to the business review, but quoted companies (those incorporated in the UK and listed on certain UK, EU or US markets) will be required to report, to the extent necessary for an understanding of the business, on their strategy, their business model, and any human rights issues. Quoted companies will also be asked to report on the number of men and women on their board, in executive committees and in the organisation as a whole.
At the moment some companies choose to produce a summary financial statement (SFS) which they can send instead of the whole report to shareholders who have elected to receive it. In the future companies will be able to send, to shareholders who agree, only the strategic report. Shareholders’ previous election to receive the SFS will in future apply to the strategic report.
The draft regulations also remove several reporting requirements from all or some companies. This is covered in more detail in the section on simplification, but essentially we intend to remove from the business review, the requirement for companies to include information about essential contractual arrangements. From the directors’ report we plan to remove the following reporting requirements which have either been superseded, are already required elsewhere or do not provide meaningful information:
- Information about any essential contractual or other arrangements
- Information about the principal activities of the company in the course of the year
- Information about asset values
- Information about charitable donations
- The requirement for private companies to give information about the acquisition of their own shares
- Information about the policy and practice of payment to creditors.”
The Government is working with the Financial Reporting Council to provide guidance on the style of the new strategic report, and the FRC is expected to consult on this early in 2013.
The regulations will come into force in October 2013. This means that companies with reporting years ending after October next year will be expected to prepare their annual report in line with the new regulations.