New Strategic Report Guidance Issued

On 31 July the Financial Reporting Council (FRC) issued its updated Strategic Report Guidance. While the general structure of the guidance and key messages remain largely unchanged, there have been important changes in two key areas:

EU Non-Financial Reporting Directive.

Updates have been made to reflect new non-financial reporting requirements which came into effect for certain entities from 1 January 2017. The new rules require that ‘traded’, banking or insurance companies, with more than 500 employees (referred to as PIEs in the guidance), prepare a ‘non-financial information statement’ within their strategic report.

The relationship between this non-financial information statement and the existing strategic report requirements is complex and requires careful consideration by those companies affected. Therefore, the FRC has separated out what content is required by companies within the scope of the new non-financial reporting requirements (Section 7B) from those companies not affected by the new non-financial reporting requirements (Section 7A).  

The FRC has also included additional information in the Scope section to help companies determine which parts of the guidance to apply.

s172 reporting

The guidance has been updated to place greater focus on the directors’ duty under section 172 of the Companies Act to promote the success of the company (the purpose of the strategic report is, after all, to inform and help shareholders assess how directors have performed in this duty).

In addition, the guidance has been updated to reflect new legislation The Companies (Miscellaneous Reporting) Regulations 2018 which requires large companies, for financial periods beginning on or after 1 January 2019, to include a statement in their strategic report describing how the directors have had regard for the matters set out in section 172 when performing their duty to promote the success of the company. These matters include, for example, consideration of the interests of the company’s employees, suppliers, customers, wider stakeholders, and the impact of the company on the community and environment.

The Financial Reporting Faculty will be producing further commentary and guidance on the UK strategic report requirements and the related FRC guidance in due course. If you have any comments in the meantime then please contact