The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 (regulations) came into force on 1 October 2013. In June the Financial Reporting Council (FRC) published its final guidance on the application of these regulations which require quoted companies to prepare a stand-alone strategic report as part of the annual report in place of the previously required business review which formed part of the directors' report. The regulations can be found here.
The FRC issued an Exposure Draft which set out guidance on the application of the new strategic report requirements for consultation (see the article in our September 2013 newsletter) and, having considered the responses received, the final guidance has now been published. The FRC states that the guidance aims to be principles-based, mindful of recent developments in narrative reporting best practice and aligned with the requirements of the UK Corporate Governance Code.
Prepared by the FRC at the request of the Department for Business, Innovation and Skills, the guidance is non-mandatory, aimed at directors and written for quoted companies but intended to serve as best practice for all entities preparing strategic reports. It is designed to encourage those who prepare the annual report to consider how the strategic report fits within the whole annual report with a view to improving the overall quality of financial reporting.
The guidance comes into immediate effect (9 June 2014) and replaced the Accounting Standard's Board's Reporting Statement: Operating and Financial Review. The FRC press release can be found here and the guidance can be found here.