The FRC have published a discussion paper in which they question whether the traditional concept of the annual report remains fit for purpose. Arguably, annual reports are too long, impenetrable and fragmented. In looking at the future of corporate reporting, the challenge is how to balance the need for more concise reporting against demands for more transparency.
The FRC are proposing to unbundle existing reporting by creating a network of interconnected reports centred around a stakeholder-neutral Business Report which would set out how the company creates long-term value in accordance with its stated purpose. Alongside this, there would be a new Public Interest Report, the full Financial Statements and a series of additional standalone ‘network reports’ and disclosures (financial and nonfinancial, mandatory and voluntary). Ultimately, the model should be capable of evolving over time reflecting changes in circumstances.
The multi-report model is based on three broad themes:
- Objective-driven
The FRC believe that the objective of an individual network report should drive its content. - Communication-focused
The reports should create an active dialogue between a company and its stakeholders about issues
that matter to them. - One set of principles
The FRC believe that one common set of principles can establish coherence across all company reporting. To that end, the FRC propose four key attributes apply to the system as a whole, namely accessibility, connectivity, consistency and transparency.
As regards non-financial reporting, the FRC support the development of a single set of global standards to increase the comparability of such information.
The FRC also encourage a move away from an annual paper-based report by using technology and innovation to achieve more dynamic production, distribution and consumption of corporate reporting.
The deadline for responses is 5 February 2021.