Materiality and governance should be focus of 2015 annual reports, says FRC

The Financial Reporting Council (FRC) has written a letter to audit committee chairs in larger listed companies to highlight areas they want directors to focus on in annual reports.

The move, which comes ahead of the reporting season, puts an emphasis on corporate governance and reporting risks that a company may be exposed to as part of a process of disclosure.

Relevant to investors

The FRC has taken the initiative as part of its efforts to encourage firms to make their reports revolve around information investors will find relevant, and to present it in a way that is easy to understand.

FRC chief executive Stephen Haddrill said: "The quality of corporate reporting in the UK is generally of a high standard with companies taking steps to improve their annual reports. Being clear and concise in reporting is essential to such improvement, with companies focusing as far as possible on whether they are reporting matters that are genuinely material to investors."

Risk

Making obvious the risks that might face a company, and any plans in place to mitigate their effects, is also something that the FRC wants companies to make a priority in their reporting.

IT vulnerabilities are a particular concern, with the FRC noting that investors "have recently expressed surprise that risks relating to data protection in IT systems/ cyber risk and risks from climate change are not reported more often as principal risks."

This and other disclosures need an "ongoing drive for improvement", the letter says, calling attention to issues surrounding dividend payments.