FRC: Reporting gap between FTSE 350 and AIM widening
The Financial Reporting Council (FRC) has said the reporting gap is widening between FTSE 350 companies vs large private companies, and those listed on AIM.
The regulator published its annual review of corporate reporting this morning. It said it was “disappointed” queries over impairment of assets and cash flow statements each rose by over 10 per cent in all cases opened this year.
The FRC noted this was accompanied by an increased number of restatements in these areas, predominantly outside the FTSE 350, where there’s evidence of a widening gap in reporting quality.
It noted multiple restatements involved additional impairment charges in the parent company’s financial statements, potentially affecting its ability to distribute profits.
“We expect these to remain areas of close corporate reporting review focus in the coming reporting season.”
Despite this, the regulator said it is “pleased” that the quality of reporting for FTSE 350 businesses has been maintained and that improvements have been made in several reporting areas. Provisions and contingencies fell out of the ‘top ten’ issues for the first time in over five years.
Additionally, this year, the FRC also questioned “significantly fewer companies” over their disclosure of judgements and estimates, another area that has featured in the top ten for many years.
Commenting on the report, FRC’s executive director of supervision, Sarah Rapson said: “While it is pleasing that the quality of corporate reporting has been maintained, a widening quality gap between FTSE 350 companies and other companies is concerning.”
“Companies outside the FTSE 350 are important to economic growth and good quality reporting improves trust in business and supports investment and growth,” she added.
The regulator added that it will “continue to take a proportionate and targeted approach to its monitoring” to ensure companies comply with the relevant reporting requirements.