7 requirements for interim reporting — FRC guidance

The Financial Reporting Council’s review of interim reports highlighted the need for a better explanation of balance sheet movements.

The UK’s Financial Reporting Council (FRC) set out Tuesday how companies’ interim reporting can be improved — ahead of the interim reporting season.

In its review, which looked at reporting quality across 20 companies in various sectors, the FRC said that most companies had taken into account its COVID-19 recommendations to enhance their disclosures, “particularly in relation to going concern and the statement of cash flows”.

The regulator said: “For significant events and transactions taking place during the interim period, such as impairments, many companies provided detailed explanations and other helpful information normally reserved for the annual reports and accounts.”

However, it pointed to an area for improvement: providing better explanations on balance sheet movements.

David Rule, the FRC’s executive director of supervision, said: “Given the ongoing impact of the COVID-19 pandemic, the 2021 interim reporting season is likely to be one of the most important and consequential for users of corporate reports.”

He added: “While it is pleasing many companies followed the FRC’s COVID-19 guidance, there is still room for further improvement, particularly around providing better and clearer explanations of the impact of significant events on financial statements.”

7 elements of interim reports

The FRC set out requirements for good interim reports. Reports should:

  • Ensure that management commentaries detail important events that have occurred during the first six months of the financial year, and their impact on the financial statements.
  • Provide a comprehensive update of the principal risks and uncertainties for the remaining six months of the financial year.
  • Make sure alternative performance measures (APMs) are explained, reconciled to IFRS measures, and not given undue prominence.
  • Give going concern disclosures that explain the basis of any significant judgements, including whether there are any associated material uncertainties, and the matters considered when confirming the preparation of the financial statements on a going concern basis.
  • Detail changes to key judgements and estimates with reasons that enable users to understand management’s views about the future, and their impact on the interim financial statements.
  • Explain, in sufficient detail, events and transactions that have a material impact on the financial position and performance of the company, such as impairments. Better disclosures update relevant information disclosed in the last annual report by following the applicable disclosure guidance of individual IFRSs, such as IAS 36, Impairment of Assets.
  • Focus on providing material disclosures that are clear and concise.

Oliver Rowe ( is an FM magazine senior editor.