Private company reporting needs greater clarity
The FRC has issued its Thematic Review: Reporting by the UK's largest private companies. The review contains a summary of the FRC's key findings that companies and their auditors should take into account for future annual reports.
Overall, the quality of reporting was mixed, particularly in terms of how clearly companies explained material matters that were complex or judgemental.
Key findings that companies and their auditors should take into account for future annual reports are:
- The best strategic report disclosures focused on the matters that are key for an understanding of the company. These were explained in a clear, concise and understandable way that was consistent with the disclosures in the financial statements. Good quality reporting does not necessarily require greater volume.
- Better examples of judgement and estimates disclosures included detail of the specific judgement involved and clearly explained the rationale for the conclusion. The significance of estimation uncertainty was much more apparent when sensitivities were quantified.
- Accounting policies for complex transactions and balances were often untailored, providing boilerplate wording. Entity-specific policies are particularly critical for revenue, where the better examples explained the nature of each significant revenue stream, the timing of recognition and how the value of revenue was determined.
Read the thematic review.
Published 1 February, 2024