Government to develop high-level Strategic Report proposals in response to consultation feedback

In a response (26-page / 203KB PDF) to its further consultation on narrative reporting, issued in September, the Department for Business, Innovation and Skills (BIS) said that four fifths of organisations that expressed a clear view were in favour of the new structure, providing that the new reports did not become bogged down with "extra requirements".

It now intends to work with the Financial Reporting Council (FRC) and business representatives to establish what information should be included in each report and prevent unnecessary duplication.

"We want to develop a format that is flexible enough to allow companies to tell an integrated story in their own words, starting with their business model and strategy, covering their performance and looking towards their future," BIS said in its response.

It intends to publish draft regulations and a full impact assessment for further consultation later this year, with any changes likely to take effect from April 2013.

The Government's proposals will simplify companies' annual reporting requirements into two separate documents. The high-level Strategic Report will provide information on financial results, the company's business model and strategy, risks, remuneration and environmental and social issues. A more detailed Annual Directors' Statement will provide further information, and will be published online by default.

There was "a lot of support" for the removal of certain disclosure requirements under the Companies Act from consultation respondents, the Government said, as well as other suggestions for simplification. Proposals to do so will be considered as part of the Government's Red Tape Challenge initiative, which is intended to cut the number of regulations in operation.

However, there was little support for the more stringent auditing requirements outlined in the consultation paper, the Government said. Auditors' remits and proposed additions to auditing standards were outlined in a separate report on Effective Company Stewardship by the FRC, which is due to make amendments to its Corporate Governance Code and Audit Committee Guidance later this year.

Corporate law expert Martin Webster of Pinsent Masons, the law firm behind Out-Law.com, said that the proposals would be welcome if they brought "simplification and greater clarity to the front end of company accounts". "However, there is a lot of change coming through in this area and it has not always been clear that all is co-ordinated to achieve the same ends," he said.

The Government announced that it would take forward proposals to increase transparency on executive pay earlier this year, including new remuneration reports and the introduction of binding votes for shareholders on executive pay. Shareholders will need "a stand alone document on which to vote" the Government said in its response, however it added that companies would likely draw on their analysis of strategy, risk and performance to include some information on pay as part of the new Strategic Report.