UK: narrative reporting - ASB report and review

The Accounting Standards Board has today published 'Rising to the challenge', which reports on its review of narrative reporting by 50 UK listed companies in 2008 and 2009 (the full results are available here). The focus of the review was with companies' compliance with the business review content requirements in Section 417 of the Companies Act (2006); the communication and presentation of content; and areas that are leading to clutter in narrative reporting. 

The ASB found that, overall, most companies provided good content with regard to: financial performance and position; financial key performance indicators (KPIs); and the articulation of strategy. However, the review found that some companies struggled to meet some requirements, particularly the communication of principal risks and non-financial KPIs. In this regard, the ASB's chairman - Ian Mackintosh - has stated:

When reporting principal risks, 66% of the sample was technically compliant but in our view needed to make improvements to meet the spirit of the requirements. A number of companies resorted to simply providing descriptions of generic risks that could be easily cut-and-pasted into many other FTSE annual reports. Thirty-two percent of the sample did not disclose any non-financial KPIs, despite the [Companies Act 2006] requirement to do so where ‘necessary’ and ‘appropriate’."