UK GAAP – Narrative Reporting: How Are Companies Doing?

During 2005 and 2006 we saw the introduction and then subsequent removal of the statutory Operating and Financial Review (OFR) and the issue of the Accounting Standards Board’s (ASB) reporting standard on the OFR, which was quickly changed to a best practice reporting statement. Finally, there was the establishment of the requirement for all but the smallest of companies to prepare a ‘business review’ for inclusion in the directors’ report, as well as disclosure of risks arising from the company’s use of financial instruments.

At present, quoted companies (i.e. those whose shares are quoted on the official list of the London Stock Exchange) are subject to the same narrative reporting requirements as any other large company in the UK (although, as discussed below, this will change under the Companies Act 2006). However, the majority of quoted companies