Essential Corporate News – Week ending February 12, 2021

FRC: Reporting against Wates Principles for large private companies

On February 5, 2021 the Financial Reporting Council (FRC) published an article by Sir James Wates, Chairman of the Coalition Group that prepared the Wates Corporate Governance Principles for large private companies in December 2018, following an assessment of reporting against the Wates Principles.

The article names private companies that have provided the following:

• Good explanations of how their governance arrangements work.
• Examples of self-improvement in light of application of the Wates Principles.
• Explanations by wholly-owned subsidiaries of how the Wates Principles apply to them; and
• Illustrative examples of issues the board is grappling with.

An area in which reporting could be improved concerns how the company’s purpose has guided board-level discussions and decisions. Corporate governance reports should also be made more accessible on companies’ websites. 

The article notes that during 2021, the FRC intends to oversee a body of research with the aim of providing a more complete evidence base of reporting against the Wates Principles and promoting good practice reporting, so as to improve the quality of reporting. 

(FRC, Reporting against Wates Principles for large private companies, 05.02.2020)

FRC: Draft Strategy and Plan and Budget 2021/22

On February 12, 2021 the Financial Reporting Council (FRC) published for consultation its draft 2021/22 Strategy, Plan and Budget. It states that this reflects its continued commitment to serve the public interest whilst also moving at pace towards building the enhanced capacity and capability necessary to transform into the new Audit, Reporting and Governance Authority (ARGA). The FRC has assumed a further two-year transition period to the creation of ARGA in 2023 in proposing this Strategy and Plan and Budget.

In terms of regulatory focus, key priorities for the FRC in 2021/22 will include the following: 

• Developing and maintaining UK and Ireland accounting standards (GAAP) in a timely fashion, whilst also ensuring that the UK endorsement process for IFRS provides accountability and transparency by establishing due process oversight. 
• Issuing a feedback statement and next steps following the FRC’s report on the Future of Corporate Reporting. 
• Developing and maintaining UK auditing standards through adopting and, where appropriate, augmenting international standards, to support the delivery of high-quality audit.
• Working to operationalise the audit market competition policy proposals set out in the Government’s consultation, ahead of legislation. 
• Undertaking assessments of performance against the UK Corporate Governance Code, the UK Stewardship Code and the Wates Corporate Governance Code for Large Private Companies. 
• Subject to the outcome of Government consultation, consulting on revisions to the UK Corporate Governance Code and associated guidance ahead of legislation. 
• Delivering FRC Lab reports on stakeholder reporting and section 172 of the Companies Act 2006, risk, uncertainties and scenarios, and performance metrics. 
• Support the FRC’s transformation into ARGA through establishing a programme of work aimed at reviewing and revising standards, codes and guidance, where appropriate, in advance of legislation.

Comments are requested by March 12, 2021.

(FRC: Draft Strategy and Plan and Budget 2021/22,12.02.2021)