In an ambitious move aimed at strengthening corporate transparency and resilience, the UK Government has unveiled new draft reporting regulations for corporate reporting. Targeting large corporations with a minimum of 750 employees and an annual turnover exceeding £750 million, these fresh regulatory measures echo the government’s unwavering commitment to safeguarding shareholder interests, fortifying financial stability, and nurturing an ecosystem of continued economic resilience.
These draft amendments strive to enhance the robustness of corporations by enriching the scope and reliability of their disclosures. They aim to reveal previously undisclosed details and foster a higher level of stakeholder engagement in corporate affairs. These changes find their origin in the Independent Review of the Financial Reporting Council (FRC) and aspire to bring about remarkable improvements in corporate transparency across the UK’s business sector.
The cornerstone of these detailed regulations is the mandate for companies to include an annual resilience statement in their strategic reports. This will grant stakeholders valuable insights into the company’s risk management strategies and its efforts to maintain business resilience in the short, medium, and long-term contexts.
Companies will be obliged to outline key risks they face, especially those with potential implications for their operational or financial resilience in the short to medium term. Additionally, they will need to elucidate the measures being undertaken to manage these risks.
The resilience statement also must clarify the directors’ reasons for choosing the going concern basis of accounting, affirming their confidence in the company’s ability to meet its liabilities over the next year or longer. It should highlight any significant judgements or mitigating actions undertaken.
Additionally, the statement must present the directors’ assessment of the company’s medium-term prospects, indicating the company’s expected operational continuity and its capacity to meet its liabilities over that period. This directive reinforces directors’ responsibility to consider not just the present situation, but also the future, thereby enhancing proactive oversight.
The regulations further necessitate the annual disclosure of a distributable profits figure and a distribution policy statement. Companies must now indicate their accumulated realised profits or provide a minimum figure if total profits cannot be calculated without incurring unreasonable expense or delay. Meanwhile, the distribution policy statement should elucidate the company’s policies regarding distributions to shareholders in the short and medium-term periods.
A pivotal addition to the regulatory framework is the requirement of an annual material fraud statement in the directors’ report. This should provide an overview of the directors’ assessment of the risks of significant fraud at the company and enumerate the primary preventive and detective measures in place.
The new regulations also call for a triennial audit and assurance policy statement, outlining the company’s internal audit and assurance capabilities and its plans for securing internal assurance over information in the annual accounts and reports over the subsequent three years.
In this evolving corporate landscape, these regulations highlight the value of a CGMA qualification and other professional accounting qualifications, which prepares finance professionals to lead in this increasingly transparent and resilient business environment.
These ground-breaking regulations are set to bring about profound changes in the corporate reporting environment, fostering a culture of transparency that reinforces trust in large businesses from investors and stakeholders alike. Anticipating these changes, corporations can expect an investor community that is better informed and stakeholders that are more deeply involved.
The Financial Reporting Council has announced that the draft amendment regulations will be presented to Parliament and are expected to take effect from 1 January 2024. This timeline will apply to company financial years that begin on or subsequent to this date. Corporations are thus encouraged to acquaint themselves with these new stipulations and prepare for the imminent disclosure requirements.
While these regulations primarily target large corporations, their broader intent is to cultivate a corporate environment open to scrutiny from all stakeholders. Therefore, these new rules bear significant implications for corporate governance, obliging companies to operate with heightened transparency, responsibility, and accountability.
OTS News on Social Media