FRC publishes annual review of corporate reporting
This month’s update focuses on a series of recent publications from the Financial Reporting Council (FRC) aimed at improving the quality of corporate reporting and maintaining confidence in UK audit and assurance standards. Collectively, the publications provide useful insight into the areas currently attracting regulatory attention, while also highlighting developments that organisations and auditors should be preparing for over the coming reporting cycles.
Corporate reporting quality remains under the spotlight
The FRC has published its Annual Review of Corporate Reporting 2025/26, finding that overall standards of corporate reporting remain high across the UK market. The review showed that reporting quality among FTSE 350 companies has been maintained, while the gap in quality between larger listed entities and other companies continues to narrow. The proportion of reviews leading to substantive enquiry letters also fell for the second consecutive year.
Despite this positive picture, the review identified several areas that continue to generate regulatory challenges. Cash flow statements, financial instruments, impairment assessments, fair value measurements and revenue recognition were among the topics most frequently subject to detailed enquiry during the year. Looking ahead, the FRC also highlighted the need for organisations to prepare for significant forthcoming changes, including the implementation of IFRS 18, amendments to FRS 102 and the introduction of Provision 29 of the UK Corporate Governance Code relating to material internal controls.
The publication serves as a reminder that high-quality reporting is not simply a compliance exercise. The regulator continues to place significant emphasis on clear, coherent and understandable reporting that enables investors and stakeholders to make informed decisions.
New thematic reviews focus on financial instruments and intangible value
Building on the themes emerging from its annual review, the FRC has also published two thematic reviews examining financial instruments reporting and reporting on intangible value drivers. The reviews are intended to provide practical examples of good reporting and identify opportunities for improvement across a range of sectors.
The review of intangible value drivers highlighted the growing importance of assets and capabilities that are not always fully reflected within the financial statements. The FRC encourages organisations to explain more clearly how factors such as technology, intellectual property, specialist knowledge and other intangible resources support their business model, strategy and future performance. It also outlined the importance of consistency between narrative reporting and the financial statements themselves.
Meanwhile, the thematic review of financial instruments examined reporting by listed companies applying UK-adopted IFRS Accounting Standards. While the review found no material concerns regarding the application of IFRS 9, it identified opportunities to improve disclosures relating to hedge accounting, expected credit losses and debt factoring arrangements. The FRC continues to encourage a principles-based approach to disclosure, focusing on company-specific information and avoiding unnecessary detail that can obscure key messages.
Revisions to standards governing the use of experts
The FRC has also issued revised versions of ISA (UK) 620 and ISAE (UK) 3000, updating requirements relating to the use of external experts in audit and assurance engagements. The revisions maintain alignment with corresponding international standards and developments within the International Ethics Standards Board for Accountants (IESBA) framework.
The revised standards introduce greater consistency in how practitioners assess the competence, capabilities and objectivity of external experts. They also strengthen expectations around evaluation procedures and documentation when expert work is used as audit or assurance evidence. The changes will apply to audits of financial statements for periods commencing, and assurance reports dated, on or after 15 December 2026.
For firms that regularly engage valuation specialists, actuaries, legal advisers or other technical experts, the revisions provide a useful opportunity to review existing methodologies and documentation processes ahead of implementation.
These developments reinforce the importance of maintaining robust reporting and governance processes in an increasingly complex regulatory environment. Organisations may wish to consider the FRC's observations as part of their next reporting cycle, particularly where forthcoming changes to accounting standards, governance requirements or audit methodologies are likely to have an impact.