* ACCA's response to the FRC’s consultation says that brevity, relevance and flexibility should be the gold standard of corporate reporting
    * Shareholders must still be able to receive annual reports in paper form
    * Audit can - and does - add value

Achieving more effective communication in corporate reporting would help the Financial Reporting Council (FRC) to attain its goal of more active involvement in corporate affairs by investors, says ACCA (the Association of Chartered Certified Accountants) today in its response to the Council’s consultation Effective Company Stewardship: Enhancing Corporate Reporting and Audit.

ACCA says that the annual report needs to be reinvigorated so it is relevant for stakeholders’ needs and re-defined so that it can be regulated more effectively.

The FRC’s consultation focuses on the information companies publish in their annual reports. ACCA has concerns that many companies currently use the report for purposes of self-promotion.

John Davies, head of technical at ACCA, says: “The credibility of the main financial and narrative statements of annual reports can be undermined by too much information – the sheer amount of data and wording that is included in modern annual reports can be a detriment to good and transparent communication.

“ACCA wants to see the annual report re-defined as a regulatory document which contains the various reports and disclosures required by company law, the Listing Rules and other official guidance, but without the additional material. Brevity, relevance and flexibility should be the gold standard of corporate reporting and we should aim to avoid 'boilerplate' reporting both in financial and non-financial reports. ”

ACCA links the development of the annual report to the ongoing project to develop a new framework of integrated reporting, which may lead to a provisional framework being put forward for official approval later this year.

Speaking of the move towards integrated reporting, John Davies continues: “That project is motivated by a concern that the existing ways of reporting, whether financial or non-financial, do not adequately satisfy the information needs of readers of annual reports. Although the integrated reporting project has a long way to go before it can come up with a new template for reporting which can supersede or exist side-by-side with the existing structure, the long-term aim is to fuse financial information with much of what is currently found in narrative reports. This has the potential to improve stakeholders' understanding of how companies are performing.”

However, ACCA is concerned that the FRC proposes to end companies' responsibility to publish hard copy versions of their annual reports for those shareholders who want them. While it sees the benefits for companies of non-paper communication, shareholders must not be disenfranchised.

Expanding the role of audit
ACCA also values the role of audit in corporate governance, and is pleased to see that the FRC’s proposals include an expansion of the scope of the audit and the role of the audit committee. These moves are supported by ACCA, who says that the standard audit model needs to be expanded, again to address the changing needs of shareholders and other stakeholders.

John Davies says: “We believe that the audit can add value to stakeholders’ understanding of the business’s position and performance. Ensuring auditor independence going forward is also crucial to the performance of a credible audit, hence we support the strengthening of the role of the audit committee in monitoring this aspect."

“However, we should be careful not to overload the audit committee or have unrealistic expectations about what it is capable of achieving. The FRC's proposals would raise the bar as regards the level of skill and care that is expected of committee members – this is likely to have implications for the willingness of individuals to serve on committees.”

-ends-

For further information, please contact:
Helen Thompson / Nick Cosgrove, ACCA Newsroom
+44 (0)20 7059 5759 / 5989
+44 (0)7725 498654 / +44 (0)7963 496144
helen.thompson@accaglobal.com
nick.cosgrove@accaglobal.com

Notes to Editors

         1. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
         2. We support our 140,000 members and 404,000 students in 170 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 80 offices and centres and more than 8,000 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.
         3. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.

Cecile Bonino
Public Affairs and Media Relations Officer-EU ACCA
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