BIS consults on a new structure for narrative reporting

Published on 30 October 2012 1 comments

The Department for Business Innovation & Skills (BIS) has just issued draft regulations to try and re-energise narrative reporting in the UK. There has been a real sense of anticipation around these proposals for some time and debate about how far BIS would and should go. I would encourage you to read the ' Straight away guidance' we have just issued - summarising the regulation, its likely impact and some key issues for consideration.

For me, it's really encouraging to see that government is engaged on this important topic and, clearly using the right kind of language to move the reporting agenda forward to help build trust in business and its performance. BIS has highlighted the need for companies to think outside the compliance box and communicate clearly about what is strategically important. The draft regulations propose a separate ‘strategic report’ to replace the business review and include requirements for companies to report on their 'strategy' and 'business model'. They also address human rights issues and gender diversity.  Refreshingly, the current proposals also remove some reporting obligations from all companies. However, the proposals are not as radical as the ideas discussed in last year’s consultation.

What's interesting about the proposals is that, in their current form, they don't actually permit anything that companies with a bit of imagination cannot already do. There is clear recognition that a lot can be achieved from a culture of best practice and innovation - we don't necessarily need more rules. But given the previous rhetoric, I can't help thinking that the government has not made the most of the opportunity to help reporting catch up with the needs of today's capital markets and other key stakeholders.

  • Are the proposals going to get us to the right content for relevant and effective reporting?
  • Do proposals make the most of modern technologies, such as online information, to meet stakeholder needs more efficiently and effectively?
  • What implications will the regulations have on the year-end reporting strategy?
  • Will this help reduce frustration about the 'clutter' and growing length of annual reports?
  • Will the information companies provide be robust? Will it be trusted?

I would encourage you to read the Straight away guidance and draft regulations and make sure that BIS understands your perspective on this before the comment deadline on 15 November 2012.

You can send your official comments to narrativereporting@bis.gsi.gov.uk. And, as always, please do share your thoughts and informal views with us here.


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Comments (1)

Hedi Regaya commented:

The "strategic report" project is tremendous, and will very likely help/change shareholders understanding/vision of a business in which they are "involved".

"Classic Financial Reporting" based upon figures (balance sheets, comprehensive income statements) are very linked to the past (however, sometimes, the use of the fair value as well as provisions may provide a picture of a future performance) since most of the components are valued using the historical cost.
They do not provide a vision of the "future".
Internally, of course, a company prepares a Budget (vision for the next year) which may provide a strategic vision (for the year + 1) of the Corporation when prepared using a "top down" approach.

I have two comments on this proposal : reliability of such reports and assumptions disclosure.

Reliability

How will such a third party trust a report made by the Board without any independent assurance? Can such a reporting be subject to an audit? Like a strategic audit?
And how such audits be undertaken? How to collect evidences on "narrative" and prospective matters?

Assumptions Disclosures

Since strategy and business models are prospective/narrative information, wouldn't it be relevant to require the disclosure of all assumptions used by the Board in their vision of the going concern?

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