The OFR is one of the key recommendations of the long-awaited final report of the company law review, published this morning.
An OFR would essentially cover qualitative aspects of businesses including ‘future plans, opportunities, risks and business strategies’. It should also include information about ‘the skills and knowledge of the employees, business relationships and corporate reputation’, according to the company law review steering group.
Most public companies and very large private companies should be required to publish the report, the group recommends. Auditors should then review the OFR to test consistency with other financial records, compliance with standards and accuracy.
Former Accounting Standards Board chairman Sir David Tweedie, a key promoter of the OFR, said two years ago: ‘The operating and financial review will become more important. This is financial communication rather than financial reporting, as the narrative becomes more important and the figures can be used to check back and see if the statement is true.’
However the idea of the OFR has met with a mixed response so far. Some City players have described it as little more than a PR exercise, because it contains subjective and selective disclosures.
But a survey conducted by the Industrial Society on behalf of the steering group – involving Ernst & Young, PricewaterhouseCoopers, British Airways and BT – among others – was met with a ‘positive’ reaction, according to the final report.
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