FRC Thematic Review: Reporting by the UK’s largest private companies

  • Person icon Chris Turner
  • Calendar icon 7 February 2024 09:09
Glasses resting on notepad

The FRC has published its latest Thematic Review: Reporting by the UK’s largest private companies which summarises its reviews of the annual report and accounts of 20 of the largest UK private companies with year ends falling between September 2022 and December 2022. 

In this blog we take a look at the key findings and lessons which can be learned by those preparing or auditing accounts of all private companies.


Strategic report

The thematic review includes a reminder for companies to consider the FRC’s Guidance on the Strategic Report (June 2022). Whilst only guidance, given the requirements for private companies are relatively flexible, it provides useful explanation of the mandatory content and offers practical suggestions for compliance.

Key findings in relation to strategic reports include:

  • Group structures – often these are unclear and the activities of individual entities within the group cannot easily be understood from the information provided.

  • Fair, balanced and comprehensive analysis – in a number of cases the review was not considered balanced, or it focussed too specifically on the income statement rather than also considering material balance sheet and cash flow items or changes. It was noted though that the better examples were not necessarily the longest, demonstrating that it is quality not quantity that matters.

  • Key performance indicators (KPIs) – the better reports clearly defined which measures were considered to be KPIs, why they were important, the performance in the period and reasons for the performance compared with target and/or prior year.

  • Alternative performance measures (APMs) – again, the better reports included clear definitions of the APMs, why they provided useful information and reconciliations to the nearest GAAP measures. Poor examples included APMs which were unclear or misleading.


Primary statements

Key findings in relation to primary statements included:

  • Basic errors – presentation or classification errors were common, including misclassification of intercompany balances, and lack of justification for presentation of items as current or non-current. There were also potential errors with the determination of the functional currency in one set of accounts reviewed. Cash flow statements also featured with misclassification between operating, investing and financing activities – this also featured in our blog

  • Accounting policies – as has been raised in a lot of the outputs from the FRC of late, accounting policies are still not being tailored properly for the entity concerned. Our blog The Accounting Policies Affair outlines useful points to consider.



Consideration needs to be given to appropriate aggregation or disaggregation of revenue streams, and ensuring that accounting policies clearly cover all revenue streams for the particular entity concerned.

The thematic review also highlighted instances where entities inappropriately took exemption from disclosing turnover breakdown because they considered such disclosure seriously prejudicial to the interests of the company.


Judgements and estimates

The better examples of judgements and estimates disclosures separated the disclosure of significant judgments from key sources of estimation uncertainty. They were also tailored to the specific circumstances of the entity and were clear in terms of the precise judgments made and the rationale for the conclusion.

Entities are reminded that key estimate disclosures should only include those estimates that have a significant risk of material adjustment to assets and liabilities within the next 12 months.



Again, the better examples of disclosures were tailored to the entity’s specific circumstances. With respect to contingent liabilities, where it is not practicable to calculate an estimate of their financial effect, better disclosures included clear explanation as to why this was the case.


Financial instruments

A large number of potential disclosure errors or omissions were identified during the FRC’s review, as well as some potential measurement or recognition errors. In particular some entities appeared to be confused as to what was and was not a financial instrument. The nature and extent of risks arising from financial instruments was not always adequately explained.


How can Mercia help?

Mercia offers a range of training courses, support products including manuals to aid compliance with the regulations and offers a comprehensive technical query service for advice on your specific circumstances. 

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