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Article:

FRC announces 2018 thematic review topics

11 December 2017

The Financial Reporting Council (FRC) has announced that its Corporate Reporting Review Team (CRRT) plans to conduct four thematic reviews during 2018 covering:

  • Targeted aspects of smaller listed and AIM-quoted company annual reports
  • The effects of the new IFRS standards on revenue and financial instruments on companies’ 2018 interim accounts
  • The expected effect of the new IFRS for lease accounting
  • The effects of Brexit on companies’ disclosure of principal risks and uncertainties.

For the 2017 thematic reviews, the CRRT pre-notified participating companies that it intended to review their next annual report – giving them the chance to critically evaluate their disclosures against the relevant requirements and best practice and make improvements where necessary. We expect a similar approach to be adopted for the 2018 small companies’ thematic review but we understand that the other three thematic reviews will not feature pre-notification.

 

Smaller listed and AIM-quoted company reporting

The CRRT will inform 40 smaller listed and AIM-quoted companies that it will review specific aspects of their next published annual report. Drawing on recent FRC thematic reviews or Financial Reporting Lab reports, where the FRC has published examples of what better quality disclosures might look like, the CRRT will focus on five topic areas:

  • The Strategic Report and Alternative Performance Measures (APMs)
  • Accounting policies, including critical judgments and estimates
  • Cash flow statements
  • Tax disclosures
  • Pension disclosures.

Further information on this Thematic Review can be found in the FRC’s press release.

 

Disclosures relating to the implementation of new standards within 2018 interim accounts

The FRC was disappointed by the results of its recent focused review of the effect of the new standards in a sample of December 2016 accounts. The FRC expects companies to include detailed quantitative disclosure of their effect in their final accounts before implementation of the new requirements (eg in December 2017 year-end accounts). This should be followed up with supporting explanation in the interim accounts, prepared in accordance with the new requirements. The FRC notes that it will be particularly important to provide meaningful and clear explanation of expected changes where disclosure of the impact of the new standards provided to date has been limited.

IAS 34 requires a company to describe the nature and effect of a change of accounting policy. The FRC expects:

  • Quantitative disclosure to be accompanied by informative and detailed explanation of the changes, tailored to the company’s specific circumstances and transactions
  • Any key judgments made by management in applying the new concepts and methodologies that are introduced by the new standards to be clearly explained
  • An explanation of how the transition has been implemented, after careful consideration of the transitional disclosure requirements under these new standards and the requirements of IAS 8.

Further information on this Thematic Review can be found in the FRC’s press release.

 

Outcomes

The results of the 2018 thematic reviews are likely to be published towards the end of the year and will include examples of best practice and indications of the areas in which the CRRT considers further improvements are required.

Read the results for the 2017 reviews - Corporate Reporting Thematic Reviews – FRC’s key findings and guidance.