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Corporate Reporting – A Continuing Challenge

Financial Reporting Brief September 2019

This month’s article, 'Corporate Reporting – A Continuing Challenge', looks at new and growing challenges to be considered and addressed in Corporate Reporting 2019.

With another year passing by, focus will continue to sharpen on year end corporate reporting with less than four months to go to year end for calendar year reporters and even less for many others. There is still time however to give more thought to considerations and developments that are likely to influence the shape and content of corporate reporting.

Some major issues and developments in 2019 demanding corporate reporting attention include:

It is also a good time to look again at some of the areas which have been given much attention over recent years, including (a) the process for corporate reporting, including the role of the audit committee, and (b) the need for more specific disclosures of significant accounting judgements and more quantitative information on key sources of estimation uncertainty. Perhaps, above all in this regard currently, is to consider the potential impact of Brexit and the need for clear disclosure.


In whichever shape it comes, Brexit is nearer and nearer on the horizon with less than 2 months to D – Day. One of the biggest economic challenges for very many years and into the future, there is a loud call out for companies and their Boards to be specific about how Brexit challenges company business models. Explanation needs to be provided of how this will impact on a company’s viability and its position as a going concern. The Deloitte Annual Review Report in 2018 revealed that few companies in their sample mentioned Brexit in their annual report as a scenario they had tested. Much more attention needs to be committed to Brexit in this year’s corporate reporting and going forward.

The UK Corporate Governance Code 2018 requires confirmation from the directors that a robust assessment of the emerging and principal risks facing the company has been carried out, describing those risks and explaining how they are being managed or mitigated. Disclosures need to be carefully drafted, perhaps envisaging a number of scenarios. Key impacts need to be recognised and assumptions made and quantified. In the perhaps unlikely event that the Board concludes that Brexit has no significant impact on the company’s business model, the Board should consider how this is documented internally and how best to make appropriate disclosures to avoid the appearance of a lack of assessment of risk.

The Deloitte publication Governance in Brief: Brexit and Viability gives consideration to the key steps required, which include:

  • Assessment of the lookout period – both for longer term prospects and for viability
  • Deciding on which principal risks should be factored into the analysis in terms of impact and timing
  • Considering what will be the nature and extent of supporting analysis the Board will want to see 
  • Explaining how the directors have assessed the longer term prospects of the company

The Deloitte publication gives consideration to what are the key areas of impact and what should the board do, including some questions for directors to consider indicators of what disclosures need to be made.

Brexit, our dedicated site, calls on the firms extensive industry expertise to provide insights into how your business may meet the challenges coming down the line.

FRC – Corporate Reporting Improvements

In relatively recent times, the UK Financial Reporting Council (FRC) has released two additional publications to help smaller listed and AIM quoted companies improve their financial reporting, as follows:

  • May 2019: Practical Guide for Audit Committees on Improving Financial Reporting
  • November 2018: Corporate Reporting Thematic Review

The topics of the Thematic Review were selected from previous FRC thematic reviews, which focused on larger companies, and other aspects identified through the FRC’s regular monitoring activity. The main topics are – Alternative performance measures (APMs) and Strategic Reports, Pension disclosures, Accounting policies including critical judgements and estimates, Tax disclosures and Cash flow statements. Financial Reporting brief January 2019 commented on the main recommendations of the Review.

The Guide published in May addresses issues raised by the FRC about the quality of financial reporting, provides practical tips and questions for audit committees to consider and offers practical, cost-effective suggestions on how the quality of financial reporting can be improved. The suggestions for questions are designed to encourage active dialogue with those associated with the financial reporting process including the chief financial officer and the finance team, to explore and reflect on current practices and areas for improvement.

The FRC review processes provide firm indication that financial reporting is not always seen as a top-tier issue by smaller quoted companies. The Corporate Governance Code includes substantial provision on the role and responsibilities of the audit committee in relation to financial reporting. The audit committee has a crucial role to play in improving the reporting process and driving higher quality in financial reporting. Productive relationships with management, particularly the CFO and the finance team, together with both internal and external auditors, is fundamental to the audit committee performing its function.

Regulatory developments and market conditions are major factors in intensifying the environment for corporate reporting. The Competition and Markets Authorities Report, published in the UK in April 2019, sets out proposals for enhanced regulatory scrutiny of audit committees in relation to the year end accounts and audit process. The quality of financial reporting and the role of audit committees will continue under the spotlight going forward.

Practical measures could lead to sharper focus on how companies could improve the quality of annual reports, including:

  • Making adequate time and resources available to produce good quality reports;
  • Early engagement on the annual report by those charged with governance;
  • Deeper understanding of relevant reporting standards and requirements;
  • Increased rigour in the review of financial statements and reports.

The Guide aims to encourage good practice and to help audit committees and boards evaluate the adequacy of a company’s financial reporting function and processes and drive improvements in quality. Nurturing a culture of improvement and encouraging better understanding throughout an organisation is key. Current practices should be subject to continuing challenge and the audit committee plays a key role in the drive for continuous improvement.


Ever increasing scrutiny, constant change and a shortage of trust in business have been continuing features of the corporate reporting landscape, and stakeholder expectations continue to evolve. This is not limited to financial performance, but also to how corporates contribute to society and minimise their impact on the environment.

Each year Deloitte carries out a review of 100 listed entities and reports on the insights provided. Annual Report Insights 2018 commented on how companies have managed challenges, where they are struggling to comply together with areas of innovation and better practice. Later in the Autumn, the 2019 edition will be published.

A commitment to clear and transparent presentation of relevant and material information, and engagement with key stakeholders, can make a significant difference to how companies are perceived. High quality financial reporting contributes to a strong and efficient economy by improving trust, transparency and liquidity.  

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