Management accountants perform a vital role in reporting business performance to shareholders and other stakeholders through the annual report. The UK’s Financial Reporting Council (FRC) guidance on the strategic report can be used by management accountants to help transition from an annual report consisting of separate disconnected boilerplate sections to more integrated storytelling. This is aimed at better explaining how relationships between the business model, strategy, risks, and culture drive performance and prospects.
The annual report’s financial statements and notes to the accounts provide regulated technical detail but generally lack insightful narrative reporting on how financial results were achieved, what results were targeted, and how managers’ actions influenced performance. The annual report also lacked insight on the risks encountered, how they were managed, or what past performance could mean for prospects. This is where the strategic report comes in as part of the annual report.
Narrative reporting and linkages
Narrating an integrated story of business performance presupposes that the information needed to produce a coherent strategic report is available from management information. It is to some extent. But what’s often not readily available from management information is what the FRC terms “linkages”.
The FRC defines linkages as “relationships or interdependencies between, or the causes and effects of, facts and circumstances disclosed in the annual report”. That is, linkages are the cause-and-effect relationships between value drivers across the business and its operating model. Linkages also exist between governance, structure, culture, and business and operating models. Producing a well-integrated annual report represents a step up from typical management information.
Information in the financial statements, the notes to the financial statements, and the strategic report should be symmetrical with management information. This symmetry makes it possible to produce a coherent report with minimal additional effort. Ideally, the annual report should narratively reflect your management information.
The foundation of management information consists of financial and operational numbers. Management accountants are trusted in businesses because of the rigour they apply to ensuring that the numbers are reliable and relevant. But the numbers, on their own, rarely tell the whole story. Nor are they uniformly interpreted by decision-makers across the business.
Management accountants should understand the cause-and-effect linkages between operations across the business and operating model and financial outcomes and, through integrated storytelling, explain how the business achieved its financial outcomes and what it means for the business’s strategic prospects.
Integrating annual and strategic reporting
Business success depends on co-operation between business functions for co-ordinating strategy execution — this is the operational value-creation chain.
However, many businesses struggle to achieve effective co-operation with a unified focus on strategic objectives, resulting in the value-creation chain being unclear. In such an environment, management information’s emphasis is on financial metrics and functionally siloed operational measures.
Bridging the gap between this paradigm and an annual report that integrates a strategic report is a challenging annual exercise, risking incoherence, greenwashing, immateriality, and superficiality.
The FRC guidance shows how better integration between the financial statements, notes to the financial statements, and the strategic report can be achieved. The challenge for businesses is replicating this desirable level of insight in management information and decision-making systems and processes.
One way to develop that insight is by adopting Integrated Performance Management (IPM). This approach shows how to achieve linkages among strategy, day-to-day activities, incentives, and financial performance routinely within a business. It also shows how financial storytelling can help management accountants prepare an authentic, useful, and accessible strategic report.
Ultimately, the FRC’s guidance is not just about improving disclosure; it is about strengthening the quality of business insight for report users. Approaches such as Integrated Performance Management can help organisations embed these linkages throughout the year, making it easier to produce strategic reports that are coherent, credible, and genuinely reflective of how the business creates value.
Peter Spence, FCMA, CGMA, is associate technical director–Management Accounting at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.
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“FRC Amends FRS 101, Outlines Best Practices for Digital Reporting”, FM magazine, 21 May 2026
“FRC Guidance on Recognising Value of Flexible Governance Reporting”, FM magazine, 16 March 2026
“New Guidance Reflects Legislative Changes to Corporate Reporting”, FM magazine, 4 February 2026
