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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“.
- Objectives & implemented strategy
- Measured against KPIs
- Annual review and future (options)
- Principle Risks and uncertainties faced
- Further considerations
- Environmental & CO2
- Human Rights
- Social & community issues
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.
©2014 – 3resource
In the excitement of an economic outlook rising like the incoming tide during the last quarter of 2013, together with the ‘silly season’ most of us would probably have missed Statutory Instrument No. 1970 – The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, and off course you would be forgiven for it. This particular statutory instrument made the duty to provide a Strategic Report a part of UK financial reporting legislation.
To most us the update to the Companies Act 2006, Part 15 – Accounts and Reports, will not have any impact, if our our daily task is that of preparing annual statutory financial accounts for approval by the board of directors of a UK incorporated company. This is because under section 414B of the Act, an exemption applies as follows: