UK: FRRP annual report published

The Financial Reporting Review Panel has published its annual report (previously known as its activity report): see here (pdf). For the period in question - the year to March 2010 - the Panel reviewed 308 sets of accounts; 146 companies were approached for further information or explanation and 3 companies agreed to restate amounts reported in prior periods.

The Panel found improvements in the general quality of IFRS reporting although with regard to capital management and share‐based payment disclosures, reporting was sometimes poor in terms of content, extent and usefulness. The Panel also had concerns with the quality of reports and accounts of some smaller listed and AIM quoted companies. Interestingly, the report contains a couple of pages dedicated to explaining what makes a "good set of accounts" (see pages 2 and 3).

The Panel's remit was extended last year to include monitoring company's compliance with the FSA Disclosure Rules and Transparency Rules (DTR) 7.1.5 and 7.2 relating, respectively, to audit committees and corporate governance statements. In this regard the Panel examined a sample of 30 accounts and found clear room for improvement; to quote from pages 7 and 8:

.. all provided a corporate governance statement and gave information on the composition and operation of their board and of their nomination, remuneration and audit committees as required by the rules. Companies that did not apply all the provisions of the Combined Code generally provided an explanation for the departures, although these could have been clearer at times. The areas of the code most often not complied with related to board balance and independence ...

Most companies provided some explanation of the key features of the internal control and risk management systems in relation to their financial reporting process although the level of detail provided was variable. Some companies provided boiler‐plate descriptions of their budgeting process while others had not adjusted their descriptions of the key features of their internal control system to focus specifically on the financial reporting process, as now required by 7.2.5. Few companies referred to the preparation of the consolidated accounts despite DTR 7.2.10 requiring a description to be given of the main features of the group’s internal control and risk management systems in relation to the process for preparing consolidated accounts".