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DBIS is proposing that companies produce a stand-alone strategic report to accompany what will remain of the existing directors’ report. While ACCA says that it supports the broad direction being proposed by DBIS, it is anxious that the strategic focus of the new report remains strong, and clear distance is created between it and what will become a more compliance-orientated directors’ report.
ACCA’s Global Forum, which is made up of 14 expert members, sees these reforms as part of a shifting landscape of narrative reporting, and believes that the plans for the restructuring of the directors’ report should take into account the work currently being undertaken by bodies such as the FRC and the IIRC in this area.
John Davies, head of technical at ACCA, says: "The proposals to require new disclosures relating to the company’s strategy and business model are welcome. This initiative has the potential to add significantly to users’ understanding of the direction in which the board is taking the company, and will allow those users to assess how successfully the board is accomplishing its mission."
John Davies continues: "The future of narrative reporting is, however, likely to entail a fully joined-up approach in which the various factors that are material to a thorough explanation of the company’s strategy and performance are woven together so that a coherent picture is given. The proposals from DBIS do not provide such a framework, so it is important that sufficient scope is allowed in the statutory format for narrative reporting practice to develop naturally. Given that the EU is shortly to publish its own proposals for statutory narrative reporting, the DBIS proposals will also need to be consistent with future EU requirements in this area."
John Davies concludes: "Narrative reporting is an important tool for communicating information which puts a company’s financial results in a wider context of internal and external factors. Focusing the mind of directors on this purpose can only be a good thing for the future of reporting in the UK."