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FRC launches UK's first Financial Reporting Lab
The Financial Reporting Council today launches the "Financial Reporting Lab" which brings together companies and investors to identify practical solutions to today's reporting problems, such as the length and complexity of reports and accounts.
It is the first time the Lab concept has been used to help solve corporate reporting problems which, for many years, have been the frustration of investors and companies alike.
The Lab's participants will be drawn from a diverse range of sectors and will include investors and representatives from a wide range of companies.
The FRC hopes the Lab will take a large part of the cost and risk out of the process of innovation and reduces the need for regulatory intervention. The Lab will contribute to the Government’s attempts to simplify companies' narrative reporting requirements.
Commenting on today's launch Stephen Haddrill, chief executive of the FRC, said:
"For over a decade companies, investors and regulators have raised concerns about the increasing complexity and length of company reports. Initiatives from the FRC, such as Cutting Clutter, set the ball rolling. The creation of the Lab moves the debate on from theory to practice.
"The financial reporting community has chosen to come together to thrash out ways of making reports more useful to investors. Finding solutions will not be easy. The nature of global business, complex transactions and financial reporting standards all contribute to the situation we find ourselves in today. But we are encouraged by the broad support it has received from the business, investor and accounting communities.
"I would like to thank the members of the Lab Steering Group who have brought us to this point".
Further information on the Financial Reporting Lab can be found at: http://www.frc.org.uk/about/financialreportinglab.cfm.
Notes to Editors
1. The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
2. Members of the Financial Reporting Lab Steering Group are:
Chief Executive Officer - Financial Reporting Council
Head of Quality & Risk – KPMG
Vice Chairman – Technical Expert Group, European Financial Reporting Advisory Group
Former-Member - Accounting Standards Board, Financial Reporting Council
Chief Financial Officer (UK) Antofagasta plc
Director Business Environment - Dept. for Business, Innovation & Skills
Managing Director – Blackrock
Partner & Vice Chairman – Deloitte
Chief Executive – Institute of Chartered Accountants in England & Wales
Technical Director - Accounting Standards Board, Financial Reporting Council
Financial Reporting Council
Interim Chairman – Accounting Standards Board
Non-Executive Director and Audit Committee Chair Old Mutual
Former Partner – PricewaterhouseCoopers
Deputy Chair - Financial Reporting Review Panel, Financial Reporting Council
Former Partner – KPMG
Director of Research and Strategy
Professor of Accounting and Director - Centre for the Analysis of Risk and Regulation, London School of Economics
Chief Executive of CIMA
Former Partner at KPMG
Managing Director of Corporate Broking, Europe – Bank of America Merrill Lynch
Chairman, Listing Authority Advisory Committee
Finance Director, Alliance Trust
Partner – Slaughter & May
Chairman - City of London Law Society Company Law Committee
Chief Executive - The Quoted Companies Alliance
3. The Financial Reporting Lab offers an environment where corporates and investors can come together to develop pragmatic solutions to today’s reporting needs. This is not another talking shop. Instead the Lab encourages management and investors to experiment with new reporting formats that offer a tangible step forward in effective communication. There are a number of ways the Lab will help:
• A forum for exchange: Whilst management meet with analysts and investors on a regular basis, the need to discuss business trends typically outweighs a review of the effectiveness of their corporate reports or audit reports. The Lab would offer a “space” for such discussions.
• Regulation: Respondents to recent consultations have suggested that the ability to enhance and streamline reporting today is in part hindered by the regulatory construct and environment. Firstly, some have identified duplication in the various codes and reporting standards, which results in repetition, a separation of related financial and non-financial information and an interrupted narrative flow in annual reports. Secondly, there is a concern amongst some in the reporting community that innovation in reporting format and content will not be well received by regulators and auditors. The Lab welcomes debate about such issues. By having representatives of both the regulatory authorities and the audit community at the table, such issues can be addressed directly.
• Risk reward: For companies, change – particularly around the regulatory model – brings risk. Consequently, they often believe it easier and safer to stick with the status quo. From the investor perspective, helping to assist in the development of reporting is seen as a distraction and a costly use of time. By providing a hub to support the process of innovation, the Lab will offer the potential to accelerate change to the reporting model and enhance the risk-reward equation for those involved.
• The benefits of change: Finally, and most critically, it is the intention to use the work of the Lab to provide evidence to the corporate world from the capital markets that a given reporting format is valued. In so doing, the need for regulatory intervention in driving change is reduced.
4. Media enquiries should be directed to Jonathan Labrey, FRC Head of Communications, on 020 7492 2395; e-mail:firstname.lastname@example.org.