FRC’s corporate reporting target areas for 2021 and beyond
18 January 2021
Original content provided by BDO United Kingdom
The FRC has announced its thematic reviews and priority sectors for the 2021/22 corporate review reporting season. The announcement highlights a number of specific areas in which the FRC is looking for improvement in the quality of corporate reporting so that it better meets the needs of investors.
Thematic reviews and areas of audit focus
As in previous years, the FRC’s Corporate Reporting Review team will supplement its routine reviews of annual reports with five thematic reviews which are expected to be published in late autumn 2021. These will cover:
- Going Concern and Viability - given the severe pressures that many companies are currently operating under, management’s assessments and disclosures in relation to going concern and viability are of particular importance.
- IAS 37 – Provisions, Contingent Liabilities and Contingent Assets - this has been a hot topic for the FRC for a number of years, and compliance with the standard will now be the subject of a thematic review.
- Climate Risk follow-up – Streamlined Energy and Carbon Reporting - the FRC will review these new disclosures which became applicable for accounting periods beginning on or after 1 April 2019. This follows on from the FRC's recently published review of climate reporting.
- Alternative Performance Measures - a follow-up to the FRC’s 2017 thematic review, to assess whether current reporting practices meet the FRC expectations.
- Interim Reporting – the FRC will conduct a review of interim reports to assess compliance with the requirements of the Disclosure Guidance and Transparency Rules and IAS 34. In the current environment, interim reports are important communication tools allowing companies to provide updates on their performance and financial position.
Priority business sectors
Priority sectors are those considered by the FRC to be particularly high risk in terms of corporate reporting and audit by virtue of particular economic or other pressures. Companies operating in the following economic sectors will be at a heightened risk of review:
- Travel, hospitality and leisure (including airlines, travel companies and restaurants)
- Retail (particularly involving discretionary expenditure)
- Property (particularly retail and office)
- Finance services.
However, the FRC has made it clear that many sectors are currently facing significant pressures due to the COVID-19 pandemic and, therefore, as in previous years, the annual reports selected for review will not be limited purely to entities within the priority sectors.
If you receive a letter from the FRC’s Corporate Reporting Review team, whatever the content, the FRC encourages consultation with both your Audit Committee and your external auditors in preparing your response.
If you have any queries, please contact Nigel Harra, Laura Jackson or a member of our local audit team.