Financial Reporting Council wants transparent disclosure of risks in corporate reports

The Financial Reporting Council (FRC) is set to conduct a review into how companies report tax risks, focusing on the transparency of tax reconciliation disclosures.

The aim is to encourage greater transparency in the way the relationship between accounting profit and tax charges is recorded.

Considerable public interest

The FRC says that before their year-end, it will contact a number of FTSE 350 companies to let them know that tax disclosures from their next published reports will be evaluated by the corporate reporting review team.

Chairman of the FRC's financial reporting review panel and member of the conduct committee, Geoffrey Green, said: "There is considerable public interest currently in international tax arrangements, prompted by developments both in the UK and on a global basis.

"Investors have a heightened interest in wanting to understand the policy decisions made by companies and the impact these have on their current and future accounts."

Risks and uncertainties

Companies are already required to reveal the principal risks and uncertainties on their books and also to explain any proposed plans in place to mitigate the impact of the identified risks.

The FRC's review will be targeted to consider the way that a company reports overall, with an emphasis on relevant disclosures in strategic and other narrative reports.

Tax reconciliation disclosures and tax liabilities will be highlighted, along with any assets that have an unidentified short-term risk in value.