The government has launched a consultation into the development of a new reporting framework for UK companies, which includes putting the narrative section of company annual reports reports online and making them more searchable.
Earlier this year, the UK’s Financial Reporting Council’s (FRC) also made similar recommendations to companies, to improve accessibility to annual reports for investors.
In the Department for Business, Innovation and Skills’ (BIS) consultation, “The Future of Narrative Reporting”, it recommends companies present their Annual Directors’ Statement “in a consistent and coherent format aimed at online publication”.
“This will be much clearer for users to follow and will provide a platform from which future developments (for example, tagging narrative information to make it more searchable) can be implemented.
“A prescribed structure with a set layout and standard headings will increase comparability for users and provide a helpful check-list of required disclosures for companies,” the consultation document states.
It also said that the ability to link and cross-reference the material in the Annual Directors’ Statement with the financial statements will enable readers to drill down into the detail, if they want to do so.
At present, there is not a standard framework for the narrative section of a company’s annual report, which allows an organisation to communicate non-financial information to shareholders. As a result, many reports are long and complex.
In this consultation, the government is proposing to address this by implementing a framework for narrative reporting that includes a ‘Strategic Report’ and an ‘Annual Directors’ Statement’.
The Strategic Report would provide an overview of the company supported by key financial data, while the Annual Directors’ Statement would be used for more detailed narrative information. The Statement will also include the director’s remuneration report, corporate governance statement and the audit committee report.
Small companies’ ‘Director’s Report’ would also be renamed Annual Directors’ Statement.
In addition, the government wants the new framework to be adaptable enough to accommodate future requirements in corporate reporting, such as putting reports in iXBRL language. This is the computer-readable data standard for financial reporting, which HMRC and Companies House use for electronic filing of accounts.
Under the new framework proposals, shareholders will still be able to request hard copies of company reports.