The FRC recently published its Annual Review of Corporate Governance Reporting of FTSE 350 and small cap companies' reporting under the UK Corporate Governance Code. Among the many topics covered, communication - specifically, how companies communicate effectively key areas within the Annual Report - will be of interest to many of our clients.
Key takeaways on what constitutes a good ARA from a communications perspective include:
- The ARA should comply with the "four C's", ie be: Company-specific; Clear, concise and understandable; Clutter-free and relevant; and Comparable;
- It's important to determine materiality in order to avoid including information that would make the ARA overly long, too detailed and therefore less useful;
- Formatting can make an ARA easier to follow. Use icons, shading, extra line spaces, subheadings, lists, bullets points and different font effects to draw attention to certain areas;
- Use straightforward language and short sentences; use specialist terms only where necessary and make sure they are used consistently, preferably defined within a Glossary;
- Present updated information on matters that are relevant to user decisions year on year. This applies to metrics such as KPIs, APMs, other financial ratios and certain narrative information. Metrics and narrative information must be presented consistently each year, presented in a similar location, using a similar format.