Draft regulations were published in October 2012 and the changes became law on 30 September 2013.
The new format replaces the ‘business review’ with a ‘strategic report’ and UK quoted companies now have to report on:
- their strategy
- their business model
- the number of women employed at different levels in the organisation
The main areas for change are:
- The structure and content of the Strategic Report changes (and no longer forms part of the Director’s Report)
- Changes to Directors’ Report, including Greenhouse Gas (GHG) reporting
- Revised UK Corporate Governance Code disclosures
- Changes to Going Concern statement
- Revised Auditor’s Report
- New remuneration disclosures and voting
The idea behind the changes is to;
- improve the value of information contained within annual reports for investors and UK compliance authorities;
- to make it easier to make comparisons between companies; and
- to increase transparency.
Current best practice in annual report writing is to produce an integrated structure that brings together strategy, the business model, market analysis, governance, management remuneration, risk factors and key performance indicators (KPIs) in an overarching narrative.
But this method of dividing responsibility for the creation and supply of content will become more difficult, as the various elements of the document now need to knit together closer than ever before.
So whilst the new reporting framework from BIS splits the report into four parts (the Strategic Report, The Directors’ Report, the Remuneration Report and the Financial Statements and Notes), in practice, the new reporting structure might look something like this;
Strategy report
- Highlights section
- Mission statement
- At a glance
- Chairman’s statement
- CEO’s statement
- KPI’s
- Risks
- Market landscape
- Sustainability statement
Director’s report
- Governance section
- Renumeration report
- Any other statutory content
- Accounts section
The regulations came into force in October 2013. This means that companies with reporting years ending after October are now expected to prepare their Annual Report in line with the new regulations.
The consequence of this is going to be more intensive work in the run up to publishing your Annual Report; gathering and verifying the content, identifying any gaps and managing your reporting team in a more active and integrated manner. It may mean a minor tweak to your workflow, or a complete overhaul of your reporting structure, but if you haven’t got your plans in place, maybe now is a good time to get started.
