Corporate reporting – FRC publishes annual review of corporate reporting

The Financial Reporting Council (FRC) has published its annual review of corporate reporting, setting out the findings of its corporate reporting review (CRR) team on the 2024/2025 reporting season. The report also highlights the FRC’s expectations for the upcoming reporting season and developments in corporate reporting which the FRC believes to be relevant to all stakeholders.

The CRR conducted 222 reviews (of which 38% related to FTSE 350 companies) during the 2024/2025 reporting season.

There was a decrease in the percentage of reviews which resulted in 'substantive letters' – where the FRC requires further information or explanations to understand an annual report. They were issued on 37% of reviews in 2024/25, compared to 47% in 2023/24. The FRC noted that a persistent quality gap remains between FTSE 350 companies and smaller listed companies, which means it again issued more substantive letters to non-FTSE 350 companies, as compared to FTSE 350 companies. To investigate this further, the FRC is carrying out a thematic review of reporting by smaller UK listed companies, which it says will be published in before the end of 2025.

The review sets out:

• the top ten areas in relation to which the FRC asked companies substantive questions, with impairment of assets, cash flow statements and financial instruments remaining the top three;
• examples of how these issues presented themselves in the reports reviewed and the questions asked by the FRC;
• the steps companies should take to avoid these issues; and
• where further guidance is available, as well as details of relevant thematic reviews previously carried out.

The review also notes that the most common Companies Act 2006 issue on which the FRC raised questions with companies was compliance with the requirements in the Act on distributable reserves when paying dividends.

The FRC is also currently carrying out a thematic review of share-based payment arrangements, the final report for which is due to be published shortly.