10th March 2008
A new report from Deloitte says that many companies are failing to comply fully with new reporting requirements for half-yearly financial reports following the UK 's introduction of the EU's Transparency Obligations Directive (TOD). The TOD introduced more detailed and extensive requirements for half-yearly financial reports, including compliance with IAS 34 and shorter reporting deadlines.

A key finding of the study is that of the 289 companies surveyed, 72 (25%) failed to provide a responsibility statement in their half-yearly reports. This is now a requirement for all listed companies. But Isobel Sharp, Deloitte audit partner and President of ICAS suggests that the companies were not given enough time to familiarise themselves with the new regulations. She said, “The UK Listing Authority only issued the new rules in late December 2006, effective for periods beginning on or after 20 January 2007. The results suggest that the notice was not adequate and perhaps over a year should be allowed, with early adoption permitted so that precedents can be set for others.”

In line with the more extensive reporting requirements the average length of the half yearly financial report has increased by 27%. Furthermore, the risks and uncertainties disclosures, which focus on the second six months of the year, were handled well by 19 of 30 companies reviewed in detail. Only four companies referred to credit crunch issues, three in relatively general terms and only one in respect of indebtedness following a refinancing not apparently caused by credit market tightening;

The results were generally encouraging around the time taken for companies to report their results. Under the Disclosure and Transparency Rules (DTR), companies must publish their half-yearly financial reports within two calendar months of the end of the six month period. Previously, companies had 90 days to publish their half-yearly financial report, although the ASB Statement on interim reports recommended reporting within 60 days. According to the survey, Companies took on average 51 days to report (2006: 57 days). Four companies failed to report within the required two month period, being up to seven days late (2006: one company being one day late). Deloitte says that “as expected the average number of days to report fell less (by three days) for the largest companies which were already reporting more quickly than the smaller companies.”

Challenging some of the regime around half yearly reporting Isobel Sharp asked whether some of the rules were required in the first place. “A quarter of companies did not include the new responsibility statement which was probably an oversight caused by unfamiliarity with the rules. But is this rule a necessity or a nicety?”