Most business owners prioritise minimal disclosures when preparing the statutory accounts for filing with Companies House.
Understandably so, the world is a tough market place and directors want their competitive advantages kept under lock and key.
It is easier than ever to take a peek at your suppliers’, customers’, and competitors’ accounts.
While the Profit and Loss Account and Balance Sheets remain the key pages there is a growing importance for the Strategic Report to add narrative to those numbers.
A relatively new development since the implementation of FRS 102 the Strategic Report is where the directors are given the opportunity to have their say on the accounts.
Whilst some reports give very little away, often at the bottom end of the minimal disclosure limit, others choose to open their doors and give away a plethora of information.
Bang the drum
The Strategic Report should be seen as an opportunity to commercially bang the drum for the business but care is needed to keep your cards close to your chest, giving away only the information you are comfortable with.
For those with an imaginative mindset it is worth remembering that the Strategic Report is now subject to the Audit Report so a creative narrative will need to be consistent with the numbers to be permitted by the external Auditor.
What are the requirements of the Strategic Report?
A Strategic Report should contain:
• a fair review of the company’s business; and
• a description of the principal risks and uncertainties facing the company.
• the development and performance of the companyʼs business during the financial year; and
• the position of the companyʼs business at the end of that year, consistent with the size and complexity of the business.
The strategic report may also contain such matters otherwise required to be disclosed in the directorsʼ report if the directors consider they are of strategic importance to the company.
For example, many companies discuss ‘Future Developments’, technically a requirement of the directorsʼ report, within the strategic report. Where this is done, the directorsʼ report should include a cross-reference to the relevant content.
In the case of group accounts, the group strategic report must be applicable to the business, development and performance for the group as a whole.
It is a tight rope that must be walked to maintain the right balance. Accounts are scrutinised to ever increasing degrees by suppliers, customers, competitors, investors and lenders.
The Strategic Report is the first meaningful page they turn to and a well written, concise, and carefully considered narrative offers a cherry on top of the accounts without opening the doors to too much confidential information.
Next time you’re tempted to gloss over the boring pages at the front of your accounts give a second thought to who may be reading them.