Deloitte, the business advisory firm, has welcomed the Government’s decision to withdraw statutory OFR reporting, which it believes would have been a significant burden for British companies. This was outlined in its submission to the DTI consultation, ‘Business Reporting – mandatory narrative reporting’. Operating and Financial Review (OFR) rules would have required quoted companies to offer greater detail about their business performance in areas such as future plans and targets.

Isobel Sharp, audit partner at Deloitte, commented:
“Statutory OFR would have been a significant burden for British companies as a result of the detailed nature of the rules, as well as the requirement to obtain legal advice regarding forward looking information, to extend the work of auditors and to consider the impact of the detailed external review of OFRs from 2007. Research by Deloitte shows that 82% of quoted companies already produce OFR-style reports. Investors will demand, where required, improved reporting from quoted companies. This extra reporting is better given where needed, rather than imposing on all listed companies a need to tick the boxes against a long list of required disclosures in company law and a Reporting Standard."

“We also urge the Government not to make any further changes to narrative reporting in the short term. Preparers are now getting to grips with the new Directors’ Report requirements and the revised recommended Reporting Statement from the Accounting Standards Board. As with all new regimes, time is now needed to understand the new rules and to establish practices in meeting them. Further changes in 2006 would be unwelcome, especially as 2007 promises further changes caused by the EU Transparency Directive."

Martyn Jones, audit partner at Deloitte, added:
“No further guidance is necessary on the changes to the Directors’ Report requirements in the Companies Act 1985. Indeed, any more guidance may actually lead to greater confusion and increase the burden of legislation. Reporting practices need to be given time to be put into practice before any further changes are made to the relevant law."

“Uncertainties over the status of the OFR in recent months, as well as the resource needed to handle other regulatory changes in 2005/6 (such as the move to International Financial Reporting Standards) means that additional requirements or guidance would be unlikely to improve narrative reporting practices. Further reform which leads to new requirements or guidance should be founded on evidence of real needs and a study of narrative reporting by listed companies.”

Ends
Notes to editors

1. Deloitte published in October 2005 research on narrative reporting. The report “Hold the front pages: surveying OFRs and narrative reporting in annual reports” is available.
2. Deloitte has published this week a Corporate Governance Update discussing the requirements for the directors’ report and the ASB’s recommendations on the OFR. 
3. DTI consultation on mandatory reporting.

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. The information contained in this press release is correct at the time of going to press. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.