UK: the FRC's guiding principles for reporting - Louder than Words discussion paper published

The Financial Reporting Council, as part of its project reviewing the complexity and relevance of corporate reporting, has today published an important discussion paper: Louder than Words: principles and actions for making corporate reports less complex and more relevant. With regard to the purpose of corporate reports, the discussion paper states:

There is a need to re-establish the principle that corporate reports should be designed for their primary purpose – providing investors with information that is useful for making their resource allocation decisions and assessing management’s stewardship".

The FRC states that the most important conclusion from its research is that reporting and reporting regulation should be more principles-based. In this regard, eight guiding principles are proposed, divided into two groups. The first four are directed at regulators and standard setters and provide that regulations should be: targeted, proportionate, coordinated and clear. The final four principles are directed at reports, which it is said should be: focused; open and honest; clear and understandable; interesting and engaging.

The discussion paper also lists five calls for action including: improve cash flow and net debt reporting; ensure disclosure requirements are relevant and proportionate to the risks; and improve the usability of IFRSs.