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FRC sets out disclosure expectations and AGM best practice

The UK’s Financial Reporting Council (FRC) issued Monday two sets of guidance for companies’ reporting amid the current pandemic-created uncertainty. It has also provided a description of annual general meeting best practice.

FRC chief executive Sir Jon Thompson said in a news release that investors expect clear and timely disclosures from companies “setting out the impact of COVID-19 on their business and long-term prospects”.

He added: “Good, quality reporting is vital in times of uncertainty and will help investors make informed decisions about where support for companies is most needed.”

The first of the two pieces of reporting guidance, by the FRC’s Financial Reporting Lab, sets out the disclosures investors expect to see from companies. The regulator also published a report summary.

The report takes a practical look at five questions investors seek information about:

  • How much cash does the company have?
  • What cash and liquidity could the company obtain in the short term?
  • What can the company do to manage expenditure in the short term?
  • What other actions can the company take to ensure its viability?
  • How is the company protecting its key assets and value drivers?

The guidance then looks at three reporting areas: resources — including the availability of cash; actions — to manage short-term expenditure and ensure viability; and the future — how the decisions taken now ensure the company’s sustainability.

Ahead of its upcoming report on how companies use video in their corporate communication, the FRC posted a blog, “Reporting in Times of Uncertainty — Using Video”.

Going concern, risk, and viability disclosures

The FRC also issued specific guidance on going concern, risk, and viability disclosures and a guidance summary.

The guidance acknowledges that companies may have concerns around disclosure of the full range of possible outcomes or the market reaction to them, but said that investors “understand and expect such disclosure in an environment that is very uncertain”. Investors, it says, “seek clarity on the key factors and events that impact the level of uncertainty and the prospects for companies, over the short, medium, and longer term”.

AGM best practice

The FRC added its annual general meetings best practice on 8 June to its previously issued Q&A on company filings, annual general meetings, and other meetings.

For more news and reporting on the coronavirus and how management accountants can handle challenges related to the pandemic, visit FM’s coronavirus resources page.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.