A study by Deloitte of 100 listed companies has found that less than half (45%) are currently disclosing the principal risks facing the business, even though this will become a mandatory requirement in the next reporting period.  All UK quoted companies must include an Operating and Financial Review (OFR) in their annual reports for periods beginning on or after 1 April 2005, requiring a raft of new information and disclosures.

In its analysis of the most recent annual reports of 100 listed companies Deloitte found wide variance on the extent to which OFR requirements are being adopted so far. 82% of listed companies clearly adopt some or all of the broad recommendations on OFRs, up from 61% in 2003. However many are falling short of the new rules.

Of the 100 reports analysed, Deloitte found:

• 59% disclose no Key Performance Indicators (KPIs)
• 55% do not disclose the principal risks facing the business
• 67% do not have a forward looking orientation and merely discuss the past; and
• 47% do not clearly discuss the business objectives and strategies.

Isobel Sharp, audit partner at Deloitte, commented: “We have included in our report an illustrative OFR for a hypothetical company.  Producing this proved extremely time consuming and contentious.  The survey results show that for most companies producing an OFR will be a significant and challenging task.  It will not simply be a rearranging of current material.  Boards will be called upon to publish their business objectives and strategies, to identify the KPIs that they use to monitor progress against those objectives and to discuss the principal risks affecting the business.

“We found, in writing merely the illustrative OFR, we focused on positive messages and it took careful review to produce a more balanced report.  Writing an OFR is not a task to be left to the last moment and to be written in haste.”

The Deloitte report ‘Hold the front pages – Surveying OFRs and narrative reporting in annual reports’ includes details findings of the analysis of current practice; guidance on presenting information in the OFR; an illustrative OFR and a disclosures checklist.

Ends

Notes to Editors

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is based in 21 UK locations, with over 9,500 staff nationwide and fee income of £1,355 million in 2004/2005. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

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.