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Financial Reporting – Strategic Report – Part II

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In the first part of this article we wrote about the statutory underpinnings of the new Strategic Report, as part of the enhanced disclosure regime promoted by international and national financial reporting standard setters.

Today we focus on the content and structure of the Strategic Report.

We start by emphasising that the standard setters and regulator do not want a formulaic report, but being realists we believe that is exactly what the outcome is going to be. The basic idea behind the report is to better inform investors of the business model and strategic intent of the business, together with how this is measured.  In other words, where would accountability and responsibility for failure or a the very least, the key risks and uncertainties in the business or wider environment lie.


What is the purpose of the strategic report?


The basic intent is to bring together, in a cohesive and clear manner the most relevant information investors in a business would require – a ‘joined up story’ with the rest of the Financial Statements.  As per the Deloitte practical guide it “provides context to the financial statements, an analysis of past performance and insight into the main objectives, strategies, risks – and how these might impact future performance“.

With that as the background, below follows a basic outline if what needs to be covered in the Strategic Report:
[Source: Deloitte:

    • Objectives & implemented strategy
    • Measured against KPIs
    • Annual review and future (options)
    • Principle Risks and uncertainties faced
  • Further considerations
    • Employees
    • Environmental & CO2
    • Human Rights
    • Social & community issues


With the basic framework in place, the CEO or CFO should be able to ‘hang a concise, clear and current story around the business, direction, performance and risks that constantly buffet organisations in the turbulent landscape of competitive market forces.
Business Model Canvas Poster download (http://...

Business Model Canvas Poster download ( (Photo credit: Wikipedia)

Now that confidence is returning and the market and investors have a better, clearer and concise understanding of the direction and calculated risks and unavoidable uncertainties any organisation faces, then better outcomes, good, indifferent or bad can be expected.

Only time will tell and we will return to this topic area once the first statistically significant sets of financial statements containing the Strategic Report has been published, in order to evaluate whether the overall objective has been achieved.

©2014 – 3resource

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