FSN: Government abandons OFR but keeps forward looking statements

Government abandons OFR but keeps forward looking statements

15th May 2006
Last week the government tabled amendments to the Company Law Reform Bill following the end of consultation on the OFR. As widely expected the OFR has been finally abandoned but forward looking reporting remains a requirement as does KPIs on environmental, employee and community issues. Martyn Jones, a National Technical partner at accounting firm Deloitte told FSN “I am not surprised but the requirement to report the factors and trends affecting future performance is balanced by better protection for directors.”

A package of measures to support the Government's overhaul of company law was announced last week by Industry and Regions Minister Alun Michael. He said, "Our aim has always been to encourage meaningful strategic, forward-looking information to assist shareholder engagement while avoiding disproportionate burdens on business, in line with our better regulation agenda.”

Deloitte's Jones told FSN “Provided directors are not reckless then they should be protected but we will have to see the extent to which Directors are prepared to take a risk and make future type information available. It means that companies will need to have robust processes and systems and a methodical approach to disclosures. It will also be interesting to see how companies will approach the new requirement to report on the effectiveness of their policies towards the environment and employees.”

The requirements for narrative reporting have been streamlined so that the requirements for quoted companies are now more closely aligned to those for unquoted companies. The proposed new narrative reporting arrangements include the requirement that all companies, other than small companies, will need to produce a Business Review, as required by the EU Accounts Modernisation Directive. The purpose of the Review is to inform shareholders of the company and help them assess how the directors have performed their duty under section 156 (duty to promote the success of the company).

Quoted companies will need to ensure that, to the extent necessary for an understanding of the development, performance or position of the company's business, their Business Review includes, the main trends and factors likely to affect the future development, performance and position of the company's business; and information about environmental matters (including the impact of the company's business on the environment), the company's employees, and social and community issues.

About Us