Half-year reports for UK companies look set to be longer and filled with
greater narrative disclosure, as they comply with a pending requirement of
accounting standard, IAS 34.
According to KPMG, which assessed German companies who already complied with
the new rule and at six UK examples, the length of reports ranged from 11 to 24
pages for UK companies and 20 to 86 pages for German companies.
The new reports contain both a narrative interim management report and a
condensed set of financial statements.
The narrative section is an opportunity for the company to explain the
financial information, and must give a fair review of the important events in
the first six months of the financial year. It is also required to be
forward-looking, describing the principal risks and uncertainties in the
remaining six months.
KPMG partner, David Littleford, said the challenge is for companies to make
sure that ‘more translates into better.’
‘The flexibility to present more focused disclosure in half-yearly financial
reports than in the longer annual financial statements make it essential that
companies devote the necessary effort to preparing this important element of
their communication cycle,’ said Littleford.
UK companies will also have the new challenge of a shorter deadline for
publication of a greater amount of information.
‘Given that the deadline for publication is down from 90 days to two months,
this may need careful planning.
‘Disclosures can be very specific to the events and circumstances of the
entity so some variation in practice is to be expected. However, UK companies
should be prepared to make more disclosure than has historically been given in
half-yearly reports,’ said Littleford.
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