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News from the Lab

28 March 2017 – Making online reporting work for investors

The Financial Reporting Lab (Lab) working with the Corporate Reporting Users’ Forum in Canada and the UK have created an infographic which highlights some key ways that companies could enhance digital corporate reporting in a meaningful way. It provides some useful insights into what investors and analysts want from online reporting.

Here is the link to the infographic
 


23 March 2017 - Your chance to influence the future of the Financial Reporting Lab

The Financial Reporting Lab (Lab) celebrated its 5th-anniversary last year. Since its inception, it has produced 14 reports expressing the view of market participants on a variety of corporate reporting topics. The last, survey in 2014 fed directly into the projects we have completed over the last three years.

I am delighted to have recently been appointed as the Director of the Financial Reporting Lab. The Lab team and I would be very pleased to hear from you through this short questionnaire and in particular, your views on the future direction of the Lab and the projects that it should undertake.

We would be grateful if you could take a few minutes to answer the questions, which are tailored to you depending on the extent of your involvement with Lab activities in the past.

Please also feel free to send it on to others whom you feel might have an opinion.

Here is the link to the survey: https://www.surveymonkey.co.uk/r/V5MSQ5P

Phil Fitz-Gerald
Director, Financial Reporting Lab


16 March 2017 - Lab calls for participants for new project on the reporting of risk and viability

The Financial Reporting Lab (the Lab) invites companies, investors and analysts to participate in a project on effective Risk and viability reporting.

This project follows the publication of the Lab Report on Business model reporting which was published in October 2016. It will explore how companies can develop effective principal risk reporting and viability statement reporting to meet the needs of investors.
 
Full details of the project can be found here.
 
We invite companies, investors and analysts to indicate their interest in participating by 21 April via email at FinancialReportingLab@frc.org.uk.


26 January 2017 - FRC publishes Lab case study: WM Morrisons Supermarket PLC

The Financial Reporting Council’s (FRC) Financial Reporting Lab has today published a case study report on WM Morrisons supermarket PLC, which focuses on disclosures of Supplier Relationships and Commercial Income.

The study follows Morrisons through the process of reporting on commercial income in 2014/15 and 2015/16, and finds that the holistic approach was considered helpful by investors.

While the report focuses on an issue of most relevance to the retail industry, its themes are applicable more widely. The report provides valuable insight into how investors’ views on reporting and disclosure on emergent issues evolve over time, and notes strong opinion from investors that confidence in a company’s finance processes and transparent reporting translates positively into confidence in the company.

This report forms part of the FRC’s Clear & Concise reporting initiative that promotes transparent and accessible reporting.

A copy of the report can be downloaded here.


19 December 2016 - Lab encouraged by early improvements to dividend reporting

The Lab publishes its implementation study on Disclosure of Dividend: Policy and Practice. The study follows on from The Financial Reporting Lab’s report ‘Disclosure of dividends – policy and practice’ published in November 2015. This implementation study examines how companies from across the FTSE 350 have implemented investors’ preferences highlighted in the Lab’s original report; the study found that 28 companies have enhanced their disclosures.
 
The Lab is encouraged by the improvements made by the 28 companies identified in this study. However, there remain a large number of companies who might benefit from implementing the Lab’s findings, improving their communication with investors.
 
The full implementation study report provides further details on the improvements made and examples of good practice. The full report is available here.


27 October 2016 - FRC publishes Lab project report: Business model reporting

The Financial Reporting Council’s (FRC) Financial Reporting Lab has today published a report on ‘Business model reporting’, which provides valuable insight for companies on the importance of business model information to investors, and the type of information they are seeking.

This report forms part of the FRC’s Clear & Concise reporting initiative that promotes transparent and accessible reporting. The report reflects the views of 19 companies, 36 investors from 27 investment and analyst organisations, and 2 retail shareholders who contributed to this Lab project. The Lab found:

  • Business model information is fundamental to investors’ analysis and understanding of a company and a lack of good disclosure on business model raises concerns over the quality of management;
  • As business model information provides context to the other information in the annual report most investors want it positioned towards the front of the Strategic Report;
  • Where a company operates a number of business models, disclosures of each significant business model is desired;
  • Investors are looking for better natural linkage of business model information to other sections of the Strategic Report, and consistency with disclosure in the annual report; and
  • Investors are looking for more detail than is currently provided by most companies. In particular investors find disclosures are often lacking information that answers questions such as:
    • What are the key revenue and profit drivers and how do profits convert to cash?
    • Are there any key asset and liability items that support the business model?
    • What is the company’s competitive advantage?

The Lab report also includes examples of current good practice as well as highlighting how disclosure could be modified to provide more value to investors.


A copy of the report can be downloaded here.


08 June 2016 - Lab call for participants - Digital Future: Data

The Lab announces a call for participants for its next project, Digital Future: Data, which will look at how the use of technology to communicate corporate reporting to the investment community might evolve.

In Digital Future: Data, we will investigate:

  • How technology trends might drive future change in corporate reporting and provide opportunities for improvements in the access to, and analysis of, corporate reporting data; and

  • How transformation of reporting formats, potentially driven by regulatory change (such as the expected implementation of a European Single Electronic Format for corporate reporting by 2020), might be optimised for investors and companies.

For more details of the project and how to register interest, please read the full call here.



02 June 2016 - The Components of Digital Reporting

Read the Lab's article on the Components of Digital Reporting originally posted on our LinkedIn page.



10 February 2016 - Disclosure of dividends - policy and practice 

The FRC's Financial Reporting Lab (the Lab) has today made available slides and a  60 second animation summarising the key findings of the Disclosure of dividends -  policy and practice project report.


04 February 2016 - FRC comments on new IFRS requirement on debt disclosure

The Financial Reporting Council (FRC) issued a press release welcoming improved debt disclosure standards.  Commenting on the publication of ‘Amendments to IAS 7’, by the International Accounting Standards Board (IASB), Director of the FRC's Financial Reporting Lab, Sue Harding, commented:

"The Financial Reporting Lab's work on net debt reconciliations demonstrated that investors need more information on significant cash and non-cash changes in debt. The new requirements will provide welcome transparency on this. We encourage the IASB to continue its consideration of enhanced disclosure of the accessibility of cash and cash equivalent balances.” 


24 November 2015 - FRC publishes Lab project report: Disclosure of dividends - policy and practice

The FRC's Financial Reporting Lab (the Lab) has today issued a project report Disclosure of dividends - policy and practice; exploring how companies can make dividend disclosures more relevant for investors.
 
Building from the contributions of 19 companies and 31 investors, the report explains, including through the analysis of existing good, proportionate disclosure practice, why investors want information about dividends and what they want to know.
 
Dividend disclosures need to be clear and provide adequate information so that investors can evaluate the board’s stewardship of the company and assess prospective dividends.
 
Investors want to know:

  • Why has the company selected the dividend policy?
  • What will the policy mean in practice?
  • What are the risks and constraints associated with the policy?
  • What was done in practice to deliver under the policy?

Investors said that they also want disclosure of the circumstances in which companies expect to pay special dividends or buy back shares, and whether they are in the best interests of shareholders.
 
All investors consider that the disclosure of dividend resources, i.e. cash and the amount of the company’s reserves legally available for distribution under company law (distributable profits), is helpful in circumstances where the ability of the company to pay dividends is, or might be, insufficient relative to the level of dividends indicated by the policy. Some investors believe that distributable profits are always required to be disclosed. The FRC understands that the Companies Act 2006 does not require companies to identify separately distributable profits on their balance sheet.
 
Investors find that the dispersal of disclosures across annual reports and other communications results in repetition, and makes it hard for them to find the information they need. They said it would be helpful to group together similar or related disclosures on dividends, or to draw links between the disclosure elements.

A copy of the report can be downloaded here.


24 July 2015 - Lab call for participants: Project on Business model reporting

The Financial Reporting Lab (the Lab) invites companies, investors and analysts to participate in a project on effective Business model reporting.

It is envisaged that this project will assist companies to understand what information the investment community values in business model reporting, and how the information is used. The Lab anticipates that the project will explore a number of characteristics:

  • Definition of ‘business model’;

  • Preparation of business model disclosures;

  • Investor use of business model disclosures; and

  • Attributes that characterise good business model reporting.

This project is the first of a series of projects examining best practice reporting in the following interrelated areas of disclosure:

  • Business model reporting;

  • Principal risk reporting; and

  • Viability statement reporting.

The call for participation can be found below:

Financial Reporting Lab Call for participants: Project on Business model reporting


Companies, investors and analysts are requested to express interest in participating in the Business model reporting project by 15 September 2015 either via email at: financialreportinglab@frc.org.uk, or by contacting Sue Harding by telephone on 020 7492 2442 or Carl Renner on 020 7492 2455.


17 June 2015 - Lab event

The Lab event “Reporting Innovation” was held on 28 May.  Videos of the sessions as well as the slides used at the event are now available on the Lab’s event page - Lab Event 2015.


29 May 2015 - Lab implementation study: Reporting of Audit Committees

The Lab publishes its implementation study on Reporting of audit committees. The study follows on from The Financial Reporting Lab’s report Lab project report: Reporting of Audit Committees published in October 2013. This Lab implementation study considers how well 34 companies from across the FTSE 350 have implemented investors’ preferences highlighted in the Lab’s original report. Key findings include:

  • Style of the audit committee report – 82% of companies presented their AC report as a separate report and all committees wrote in the first person. 62% included a photo and 24% included the signature of the AC chair; both are ways to personalise the report preferred by investors.
  • Significant reporting issues – 94% of issue disclosures contained clear context and 84% detailed the AC’s actions, but improvement in explanations to make each issue disclosure specific to the company and to include the conclusion reached by the AC and the rationale could be made.
  • Assessing external auditor effectiveness – 41% of companies provided a reasonably good level of detail of their assessment process. The FRC has issued practice aid to assist in AC’s carrying out this assessment and hope that this will prompt further improvement in reporting.
  • Appointing the auditor – disclosures largely meet investor preferences, but clarity in relation to timing of next audit tender, and current audit partner tenure, rotation, and name should be considered; and
  • Safeguards on non-audit services – 94% of AC reports included the non-audit services policy and 73% described the criteria for AC approval. However, improvement in reporting of the nature of non-audit services received, together with the relevant fee, and clearly stating the ratio of non-audit to audit fees, could be made by many companies.

The Lab encourages audit committees to continue to improve their reports to better communicate with investors, and recognises that some may be taking further steps in the second year of implementation.

A copy of the full study can be found here. 



28 May 2015 - FRC publishes Lab project report on Digital present

The Financial Reporting Lab (Lab) has today published Digital present, its report on investors’ views on digital communication used by companies in their corporate reporting. The report shows that investors welcome digital reporting where it is helpful in meeting their needs for corporate information.

The Lab found:

  • The annual report and its contents are of paramount importance to investors. PDF, with its ‘search’ capabilities, is investors’ preferred format for digital annual reports;
  • PDF offers a range of ways to blend the best of paper and digital formats;
  • Companies could make better use of PDFs by thinking about their presentation on screen, keeping them simple, and optimising them for searching; and
  • Investors need to absorb information on many companies in an efficient manner. Digital communications are of most interest to investors when they bring new information to investors’ attention while avoid duplication, and provide clarity on the purpose of each digital channel or tool and the scope of information it contains.

The report shares practical suggestions on how companies can improve their digital corporate reporting across a range of communication channels, tools and PDF annual reports.

Sue Harding, Director of the Financial Reporting Lab, said:

“Investors have shown they are open to innovation when it meets their needs to access information relevant to their analysis, across companies and time. To enhance current digital reporting methods and innovate further, it will be important to build on the attributes identified as being most helpful. We will do this in our next phase of work on the Digital future.”

The Lab will build on the findings from this Digital present report, to inform its next phase of work on the Digital future. It will work with companies and investors to develop ideas for optimising the opportunities digital reporting offers to companies and investors.

The Lab has released a survey alongside the Digital present report seeking views on digital reporting from those involved in the production and use of corporate reporting. The survey will be open until the end of June.

https://www.surveymonkey.com/s/digifuture
 
A copy of the report can be downloaded here

Digital Present In 60 Seconds
 


Previous news:

07 May 2015 - Lab event: Reporting innovation

22 April 2015 - Hold the date

20 January 2015 - Clear & Concise event in Brussels: Shaping the future of financial and non-financial reporting

05 February 2015 - FRC publishes Lab case study report on William Hill accounting policies

05 November 2014 - Lab reminders for the 2014 reporting season

16 September 2014 - Lab publishes project slides

12 August 2014 – FRC publishes Lab insight report Towards Clear & Concise Reporting

25 July 2014 - FRC publishes Lab report on Accounting Policies and Integration of Related Financial Information

11 July 2014 - Financial Reporting Lab Stakeholder Survey (now closed)

09 May 2014 – Financial Reporting Lab Stakeholder Survey – We want your views!

30 April 2014 -  Corporate Reporting in a Digital World

31 March 2014 -  New Financial Reporting Lab project on Disclosure of Dividend Policy and Capacity

31 January 2014 - Reminders for the reporting season

24 October 2013 - Project Report: 'Reporting of Audit Committees'

10 October 2013 – Companies: Are you doing what you can to answer investors’ basic questions about your debt and cash flows?

08 May 2013 - New Project: Accounting policy disclosures and integration of related financial information

15 March 2013 -  Lab Update 

5 March 2013 - Project Report: Reporting of pay and performance

20 February 2013 - Project Report: Presentation of market risk disclosures

17 December 2012 - New Project: Audit Committee Reports

26 November 2012 - 2012 Lab Survey

22 November 2012 - First Year Event

6 November 2012 - Project Reports: Debt and Cash Flow Disclosures

1 November 2012 - New Project: Remuneration Reporting 

17 September 2012 - Project Report: Net Debt Reconciliations

21 June 2012 - Project Report: A single figure for remuneration

30 March 2012 - New Project: Remuneration Reporting


07 May 2015 - Lab event: Reporting innovation

The Financial Reporting Lab is holding an event on 28 May with the theme 'Reporting innovation'. All welcome! Click here to view videos and slides from the event.
 

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22 April 2015 - Hold the date


 

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20 January 2015 - Clear & Concise event in Brussels: Shaping the future of financial and non-financial reporting

On 20 January the FRC held an event in Brussels to discuss its Clear & Concise programme, and how its various branches fit in with developments in Europe. There were around 50 attendees at the event held at the FRC's Brussels office.

Here are the slides on the Lab, presented by Sue Harding, Director of the Lab.

Click here for the full presentation.

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05 February 2015 - FRC publishes Lab case study report on William Hill accounting policies

The Financial Reporting Council’s (FRC) Financial Reporting Lab (Lab) has found that investors support fresh approaches to the disclosure of accounting policies.

Building on the Lab’s recent report ‘Accounting policies and integration of related financial information’, the Lab has published a case study conducted among some of William Hill plc’s investors, retail shareholders, and analysts. The study highlights the company’s experimentation with accounting policy disclosure. The company's investors and analysts liked the clear identification of significant accounting policies, and effective disclosure of policy information in order to understand the business and its performance.

This is the first of a series of case studies being run by the Lab to support the FRC’s Clear & Concise reporting initiative that promotes transparent and accessible reporting.

The full report can be found here.

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05 November 2014 - Lab reminders for the 2014 reporting season

With the 2014 reporting cycle fast approaching the FRC’s Financial Reporting Lab has today published its “Lab reminders for the 2014 reporting season”. The reminder summarises the Lab’s published reports and highlights areas where relatively simple changes could improve corporate reporting, enhancing the usefulness of reports for investors.

The summary brings together key finding from the reports:

  • Towards Clear & Concise Reporting
  • Accounting policies and integration of related financial information
  • Reporting of Audit Committees
  • Presentation of market risk disclosures
  • Debt terms and maturity tables
  • Net debt reconciliations
  • Operating and investing cash flows

A copy of the summary can be found here.
 

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16 September 2014 - Lab publishes project slides

The Financial Reporting Council’s (FRC) Financial Reporting Lab (the Lab) has published slide packs which summarise the key findings from their two most recent reports:

Towards Clear & Concise Reporting

This examines progress made by companies towards producing relevant and succinct annual reports and accounts, and provides ideas on how companies can make further progress. The slides provide an overview of the key findings from the report. The full report has additional examples from BP and Prudential as to how they made their reports clearer and more concise as well as providing some aids on cross-referencing, characteristics of good reporting and the regulatory context.

Accounting policies and integration of related financial information
This report provides valuable insight for companies on what investors want from accounting policy disclosures and where they should appear in financial statements. The slides highlight key views of investors. The full report provides examples of practice from participant companies including Schroders and Vodafone.

The Lab has developed the slide packs to assist organisations in the preparation of their own materials in relation to Lab project report findings.

Slides and the full reports are available here.

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12 August 2014 – FRC publishes Lab insight report Towards Clear & Concise Reporting

The Financial Reporting Council’s (FRC) Financial Reporting Lab (Lab) has published an insight report ‘Towards Clear & Concise Reporting’. This examines progress made by companies towards producing relevant and succinct annual reports and accounts, and provides ideas on how companies can make further progress.

Based on a review of the most recent round of annual reports published by FTSE 350 companies, the Lab encourages companies to think about:

  • the communication channels used and how to match information to users’ needs;
  • how to focus content on what is most important to investors;
  • removing immaterial disclosures;
  • using cross-referencing and layout to improve clarity; and
  • planning ahead.

The report also gives practical insight on the process of change and how BP and Prudential have managed their own process of change.

Sue Harding, Director of the Financial Reporting Lab, said:

“The FRC’s Clear & Concise reporting work seeks to promote reporting from which investors can, with justifiable confidence, draw conclusions about a company’s performance, position and prospects. Now is an ideal time for companies to think about how to take steps to make their next annual reports clearer and more concise.

This Lab insight report provides examples of how companies are actively working to improve their annual reports and accounts and identifies some questions companies may wish to address. By sharing observations on steps already being taken by some companies, we aim to provide a useful source of ideas to act as an impetus for further progress towards clear and concise reporting.”

A copy of the report can be downloaded here.

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25 July 2014 - FRC publishes Lab report on accounting policies and integration of related financial information

The Financial Reporting Council’s (FRC) Financial Reporting Lab has published a report on ‘Accounting policies and integration of related financial information’, which provides valuable insight for companies on what investors want from accounting policy disclosures and where they should appear in financial statements.


16 companies, 19 institutional investor and analyst organisations, and over 200 retail shareholders took part in the Lab project. This report is a further contribution to the FRC’s programme of work to promote Clear & Concise reporting from which investors can, with justifiable confidence draw conclusions about a company’s performance, position and prospects.

The report shows that for significant accounting policies, investors want improved disclosure that avoids boilerplate text by being specific to the company and providing sufficient detail to understand how the company accounts for its transactions. They are also keen to gain a better understanding of the impact of judgement and estimation on the reporting of a company’s results and financial position. Their suggestions support Clear & Concise reporting.

The Lab report includes examples of current good practice as well as highlighting how disclosure could be modified to provide the most value to investors in the future.

A copy of the report can be downloaded here.

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11 July 2014 - Financial Reporting Lab Stakeholder Survey (now closed)

The Financial Reporting Lab survey is now closed, but please do share any comments for the Lab by emailing FinancialReportingLab@frc.org.uk

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17 June 2014 – Financial Reporting Lab Stakeholder Survey.   Closing soon!

In early May the FRC’s Financial Reporting Lab (the Lab) launched a survey seeking feedback from all those involved in reporting.  It will take no more than a few minutes, and will provide us with valuable information to guide future projects and activities of the Lab.

  • The survey closes on Monday 30 June so if you have not yet completed the survey then there is still time.
  • The survey is focused on what the priorities of the Lab should be going forward and providing feedback on its activities to date.
  • Answering these questions should not take more than a few minutes, and will provide us with valuable information to guide future projects and activities of the Lab.
     

Please click on the following link to answer the questions online:

https://www.surveymonkey.com/s/FPGSNZ2    
 
If you have already completed the survey we thank you for your time.

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09 May 2014 – Financial Reporting Lab Stakeholder Survey – We want your views!

The FRC’s Financial Reporting Lab (the Lab) was launched to facilitate improvements in the effectiveness of corporate reporting in the UK. So far with the help of companies and investors, the Lab has published seven reports which have covered a range of governance and financial reporting topics.

To ensure that the Lab’s work remains focused on issues important to the reporting community, feedback is requested from all those involved in reporting, including companies and their advisors, auditors, representative/professional bodies and investors (institutional and individual) and analysts, via a short survey. The survey is focused on what the priorities of the Lab should be going forward and providing feedback on its activities to date. Answering these questions should not take more than a few minutes, and will provide us with valuable information to guide future projects and activities of the Lab.

Please click on the following link to answer the questions online:

https://www.surveymonkey.com/s/FPGSNZ2    
 
We would be most grateful to you for taking the time to complete the survey, and ask that you do so by Monday 9th of June. Please also feel free to forward this request to anyone else you feel may have an interest in providing views.

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30 April 2014 -  Corporate Reporting in a Digital World

The Financial Reporting Lab (the Lab) announces a project to investigate how companies are, and might in the future, use digital media in their corporate reporting to improve investors’ access to information. The Lab will initially review how companies currently use a wide range of digital media, including websites, videos, apps, social media platforms and blogs in their external communications to investors, and how investors use what is produced.

This project is the first part of a series of three projects on Corporate Reporting in a Digital World. Over the next 18 months the Lab plans to investigate:

  • Digital Present:  The current state of corporate reporting through digital media;
  • Digital Challenges:  Barriers to the use of digital media in reporting;  and
  • Digital Future:  How companies might make the most of technological opportunities.

This project doesn’t signal the end of reporting by companies on paper, but rather is designed to look forward to the opportunity digital methods may offer.  Many companies have already begun to innovate in the area of digital reporting, and the Lab can uniquely add to the debate by helping companies and investors explore what is best in current practice as well as looking towards a vision of what reporting might look like in the future to better meet their needs.

The Lab is inviting listed companies, investors and analysts to express their interest in taking part in the project. Those interested in participating can contact the Lab via email at: FinancialReportingLab@frc.org.uk, or by telephone on 020 7492 2458 by 30 May.

Full details of the call for participants can be found here:

 Call for participants - Corporate Reporting in a Digital World

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31 March 2014 -  New Financial Reporting Lab project on Disclosure of Dividend Policy and Capacity

The FRC invites listed companies and investors/analysts to participate in a project on the effective communication and disclosure of dividend policy (sometimes referred to as dividend strategy) and capacity.

 Lab Project: Disclosure of Dividend Policy and Capacity
 

This project will assist companies in better understanding investor concerns on current practices. It will also provide an opportunity for companies to enhance their reporting and provide information which investors indicate is important to their assessment of an investment case.

It is anticipated that the project will explore the communication by companies at the group/holding company level, in respect of:
 

  • any significant constraints on dividends, such as structural, legal or other considerations that could prove limiting to the conversion of profits to a flow of cash dividends to shareholders; and
  • the nature of the company’s dividend policy and how the policy relates to its strategic objectives and the company’s capacity to pay dividends.

Companies and investors/analysts are asked to indicate their interest in participating in this project over the course of April.  This will allow the Lab to obtain input from the investment community over the following months, with the aim of publishing the Lab’s report on this topic in the second half of the year.
 
Companies and investors/analysts interested in discussing participation in this project should contact the Lab team by email at: FinancialReportingLab@frc.org.uk or contact Sue Harding by telephone on 020 7492 2442 or Marian Williams on 020 7492 2428.

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31 January 2014 - Reminders for the reporting season

Since inception, the FRC’s Financial Reporting Lab (the Lab) has published seven reports on a variety of governance and financial reporting topics.  By highlighting areas where simple changes could improve corporate reporting, the Lab aims to enhance the usefulness of company reports to investors.

With many companies now engaged in the reporting cycle, we thought it would be helpful to highlight some of the key topics from our reports to date.  The summary brings together key finding from reports on:

  • Audit Committee reporting
  • Remuneration reporting
  • Presentation of market risk disclosures
  • Debt terms and maturity tables
  • Net debt reconciliations
  • Operating cash flows

A copy of the summary can be found here.

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24 October 2013 - Project Report: 'Reporting of Audit Committees'.

The Lab has published its report on ‘Reporting of Audit Committees’ which provides insight from companies and investors on effective approaches to audit committee (AC) reporting including the content and the way information is presented. 19 companies and 25 investor and analyst organisations took part in the project that has been timed so that companies can benefit from the report’s observations when drafting their reports for this calendar year.

Revisions to the UK Corporate Governance Code made in October 2012 introduced requirements for audit committees to describe in more detail the work that they do. The Code calls for descriptions of the significant issues considered by AC’s in relation to the financial statements and how they were addressed, how the AC assessed the effectiveness of the external audit process and their approach to appointing the auditor and safeguarding objectivity and independence relative to the use of non-audit services. The Competition Commission has proposed that AC reports should be subject to an advisory vote.

Audit committee reports form part of the conversation between companies and investors building confidence in this important area of governance and showing how it contributes to good financial reporting.  The Lab found that investors are keen to gain an understanding of what issues have been the subject of the audit committee’s focus for the year. Taking time to ensure information is disclosed in the most appropriate place in the annual report, allows cross referencing to be used to help investors locate the related information quickly, while avoiding repetition. The report gives examples of what investors are asking for.

The report suggests that audit committee chairmen should:

  • Demonstrate ownership and accountability by personalising their report
     
  • Ensure reports are specific to their company and current year’s activities
     
  • Describe in detail actions taken rather than just the functions they serve
     
  • Depict their specific activities during the year and their purpose, using active, descriptive language
     
  • Disclose judgements made for the year, and the sources of assurance and other evidence used to satisfy themselves of the appropriateness of the conclusion
  • Consider their audience in describing issues and their context
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10 October 2013 – Companies: Are you doing what you can to answer investors’ basic questions about your debt and cash flows?

The Lab has developed a summary of reporting practices that investors have indicated help to answer their basic questions on debt and cash flows, such as:

  • How much debt is owed and when is it due? and
  • How do operating profits convert to operating cash flows?
The reporting practices were highlighted in the Lab’s three reports: Net debt reconciliations, Debt terms and maturity tables, and Operating and investing cash flows.   The summary can be found  here.

Companies that aren’t already following these practices may be able to enhance their reporting this year based on information already to hand. The Lab’s work was conducted with the help of five companies (BT, National Grid, Shell, Vodafone, and Xchanging) whose disclosures are used in the Lab’s reports to illustrate many of the reporting practices favoured by the investment community. The summary also explains the context of why the practices are important to investors.

The Lab has also updated its Current Projects page on the FRC’s website, providing an update on its projects on Reporting by Audit Committees, Accounting Policy Disclosure and Integration of Financial Review and Financial Statement Information, and Cutting Clutter Case Studies. This page will be updated regularly as projects develop.
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08 May 2013 - New Project: Accounting Policy Disclosures and Integration of Related Financial Information

The FRC’s Financial Reporting Lab (the Lab) is calling for listed companies and investors/analysts to participate in a  project on approaches to disclosing accounting policy information that are considered to be most effective. This project will also explore the ordering of footnotes to the financial statements, as this is a topic that arises when companies integrate accounting policy disclosure with detailed footnote disclosure. We also plan to consider linking or integrating related information on policies and their application, the resulting financial statement information, and the financial review.

The aim of the Lab’s project is to provide insight from the corporate and investment communities on effective approaches to reporting, including both the content and style of presenting information. The project will provide companies with an opportunity to better understand what it is that the investment community believes is most helpful, both within and beyond current requirements.

Companies are requested to indicate interest in participating in this project over the course of the next month. The call for participation can be found below:

 Opportunity for companies to test Accounting Policy Disclosures...

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15 March 2013 -  Lab Update 

 The FRC has issued an update from the Financial Reporting Lab on the following topics:

  • Recruiting for a Lab Project Director
  • Calling for additional companies to participate in the project on Audit Committee Reporting
  • Recent Lab reports on ‘Reporting of pay and performance’ and ‘Presentation of market risk disclosure’.

 The update can be found  here

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5 March 2013 - Project Report: Reporting of pay and performance

The Financial Reporting Council (FRC) has today issued a Financial Reporting Lab (Lab) project report on ‘Reporting of pay and performance’

At the request of the Department of Business Innovation and Skills (BIS), the Lab has undertaken a second project on remuneration - this time exploring the views of investors and companies on two new aspects of the draft reporting regulations on remuneration:
  • scenario charts demonstrating how directors’ pay varies with performance, and
  • a chart comparing CEO pay based on the single figure for remuneration, with company performance, measured using Total Shareholder Return (TSR).
Views were also sought on certain aspects of the Lab’s first report 'A single figure for remuneration'.
The press notice can be found here.
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20 February 2013 - Project Report: Presentation of market risk disclosures

The Financial Reporting Council (FRC)  issued a Financial Reporting Lab (Lab) project report on ‘Presentation of market risk disclosures’

The Lab explored investors’ views on the benefits of presenting risk developments and actions taken in the reporting period separately from policy related information, shown in an appendix.  Views were also sought on aspects of the content of market risk disclosures; how they are used and best presented in practice.  Changes made by HSBC Holdings plc in its market risk disclosure were used as a basis for discussion.
 
The findings of this report were mainly discussed in the context of the banking sector; however there are clear messages for all those with significant market risk exposure and indeed all those involved in corporate reporting.

The press notice can be found here.

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17 December 2012 - New Project: Audit Committee Reports

The FRC's Financial Reporting Lab is calling for listed companies and investors/analysts to participate in a new project on the reporting of Audit Committees in annual reports. This project is an opportunity for companies to better understand what it is that the investment community wants to see reported by Audit Committees, in light of both new and existing aspects of the UK Corporate Governance Code and Guidance to Audit Committees, and for investors and analysts to voice their views. The call for participation can be found below:

 Opportunity for companies to test ‘Audit Committee Reports’

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26 November 2012 - 2012 Lab Survey

The FRC’s Financial Reporting Lab (the Lab) was launched just over a year ago to facilitate improvements in the effectiveness of corporate reporting in the UK.

To ensure that the Lab’s work remains focused on issues important to the reporting community, feedback is requested from all participants in reporting, including companies and their advisors, auditors, representative/professional bodies and investors and analysts, in response to a short survey.  Answering these questions should not take more than a few minutes, and will provide us with valuable information to guide future projects and activities of the Lab.

Please click on the following link to answer the questions online: https://www.surveymonkey.com/s/FinancialReportingLabSurvey2012 .

We would be most grateful to you for taking the time to do this, and ask that you do so by Friday 7th December.  Please also feel free to forward this request to anyone else you feel may have an interest in providing views.

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22 November 2012 - First Year Event

On 22 November the Lab marked its first year with an event held at the ICAEW. Over 100 participants from the reporting community heard the experience of several company and investor participants in completed Lab projects and provided input on current and future projects through which the Lab will help to encourage further improvements in corporate reporting. 

To see the materials prepared for this event, click  here.

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6 November 2012 - Project Reports: Debt and Cash Flow Disclosures

The FRC published two Financial Reporting Lab project reports on 'Debt and maturity tables' and 'Operating and investing cash flows'.

FRL project reports:
Debt terms and maturity tables - November 2012
Operating and investing cash flows - November 2012

Press Notice:
FRC publishes Lab reports 

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1 November 2012 - New Project: Remuneration Reporting 

The Financial Reporting Lab is seeking help from listed companies to develop example formats of proposed disclosures on remuneration which - as with its previous project on this topic -  will help to shape the new remuneration reporting regulations being introduced by the Department of Business, Innovation and Skills (BIS).

 Opportunity for companies to test BIS’ proposed remuneration reporting regulations with the investment community

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17 September 2012 - Project Report: Net Debt Reconciliations

The Financial Reporting Lab published its project report on net debt reconciliation

FRL project report:
Net debt reconciliations

Press Notice:
FRC publishes Lab report on 'Net debt reconciliations'

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21 June 2012 - Project Report: A single figure for remuneration

The Financial Reporting Lab published its project report on a single figure for remuneration.

FRL project report:
A single figure for remuneration

Press Notice:
FRC publishes report on 'A single figure for remuneration'

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30 March 2012 - New Project: Remuneration Reporting

The Financial Reporting Lab published an update on its project on remuneration reporting.

FRL project report:
Financial Reporting Lab: Opportunity to test a single figure
 

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7 November 2011 - Suggested Projects

The Financial Reporting Lab has issued its first Update, in which it sets out details of a range of projects that have been suggested by companies and investors.

 November Update

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