The UK Financial Reporting Review Panel this week announced the areas its work will focus on in 2009/10.
The Panel’s monitoring activity is currently biased towards the following industry sectors:
Banking
Retail
Travel and leisure
Commercial property
House builders
The Panel will continue to review accounts from companies in these industries in 2009-10 and, in view of the deteriorating economy, will extend its selection to include other entities which derive significant revenue from the provision of services such as advertising, media, recruitment and technology.
The Panel’s work continues to cover the business review, where the Companies Act 2006 has introduced two important changes. The purpose of the review now includes helping shareholders assess how the directors have performed their statutory duty to promote the company’s success. In addition, the business reviews of quoted companies are now required to refer to the main trends and factors likely to affect the future development and performance of the company.
All business reviews must contain a description of the principal risks and uncertainties facing the company.
The Panel will consider the adequacy of these disclosures in terms of what a reasonable board might be expected to conclude on the basis of information available when the accounts are approved, and will expect to see, where appropriate, an account of how the directors are managing the risks which the company faces.
Accounts selected for review will be drawn from across the full range of companies within the Panel’s remit, which includes large private companies.
The Panel will shortly be updating its website to reflect the new business review requirements.
Bill Knight, Chairman of the Panel said: ‘In this difficult economy it is more important than ever that directors try, so far as they can, to offer a clear account of their company’s achievements and the risks that the company faces. The Panel will encourage clarity and frankness in compliance with the law.’
Notes for stduents
1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on Corporate Governance.
2. The Role of the Panel is to examine the annual accounts of public and large private companies to see whether they comply with the requirements of the Companies Act 2006 (“the Act”) including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
3. Sectors are selected by the Panel following a risk-based assessment with the Financial Services Authority and the FRC’s Standing Advisory Group, an independent committee which contributes to the discussion.
4. Where breaches of the Act are discovered the Panel seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs. Where a company’s accounts are defective in a material respect the Panel will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Panel is empowered to make an application to the court under section 456 of the Act for an order for revision. To date no court applications have been made.
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