FRRP sees improvement in principal risks reporting

ALL ASPECTS of the reporting of principal risks and uncertainties in companies’ annual accounts were the subject of further improvement in the year to 31 March 2012, according to a report by the FRC.

The reporting watchdog’s Financial Reporting Review Panel review of 326 sets of company accounts found that reporting of mitigating actions, in particular, was considered to be done well.

However, some companies failed to provide a clear description of the principal risks they faced, the FRC said.

“Others did not clearly separate the company’s principal risks and uncertainties providing instead a long list of potential risks,” the report said.

The FRRP also welcomed early signs that some boards were reconsidering the presentation of their financial information to focus on key messages, noting evidence of boards eliminating unnecessary detail and giving greater prominence to material disclosures.

As in previous years, the FRRP continued to be concerned about the quality of the reports and accounts of some smaller listed and AIM quoted companies.

“The directors of such companies should not underestimate the importance of their legal responsibility to prepare accounts that comply with the law and accounting standards,” the FRC said.

Commenting on the findings and recommendations, Richard Fleck, chairman of the FRRP and Conduct Committee said: “The panel was encouraged by the continued willingness of boards to hold constructive and open dialogue with the Panel. They have responded well to suggestions as to how they might improve the quality of their reports by focussing on key messages. That co-operation is central to the effectiveness of the UK model of enforcement.”