AIM-listed companies need to lift financial reporting standards

AIM-listed businesses still have some way to go before they catch up with their established FTSE-listed counterparts when it comes to the quality of their financial reporting, a study of company accounts has found.

The Financial Reporting Review Panel (FRRP) has found there is room for improvement in the general quality of reporting by some smaller listed and AIM-quoted companies in its annual report released yesterday.

The panel reviewed 308 sets of accounts during the past year with 146 companies approached by the panel for further information and three shamed into restating reported figures.

The board said it invested a lot of time asking companies to resolve inconsistencies
between narrative information in the front end of annual reports and the
audited accounts in the back end.

“This is likely to remain a key area of interest for the panel,” the FRRP said in a statement.

“We will focus on opportunities for clear linkages between the narrative
and accounts; principal risks and uncertainties for example, but also description of
the business model which drives the policies and other solutions adopted in the
financial statements.”

Bill Knight, chairman of the FRRP, said emphasis on narrative reporting reflects changes in the law and “an increasing call for reports and accounts to tell a coherent story, with an eye to the future as well as the past”.