Strategic Reporting Frequently Asked QuestionsA document that must be prepared by all UK incorporated companies, unless exempt, in their annual report.
What is a strategic report?
A strategic report is a document that must be prepared by all UK incorporated companies, unless exempt, in their annual report.
Who should produce a strategic report?
Small companies are exempt from the requirement to prepare a strategic report; all other UK-incorporated companies must include a strategic report in their annual report.
If your company meets two out of the three following criteria the company is not small and therefore will have to prepare a strategic report.
- Average number of employees is > 50
- Turnover is > £6.5million
- Gross assets are > £3.26million – not just the balance sheet total
Charitable companies must also, if they meet two of the three criteria, comply with the strategic report requirements like any other company.
There is no statutory requirement for an LLP to prepare a strategic report.
What makes a good strategic report?
A good strategic report should provide a complete and meaningful picture of the company’s strategy, development and performance; both present and future.
Further details on strategic report requirements can be found on page 5.
What information must a strategic report include?
All strategic reports must include:
- A fair review of the company’s business
- A description of the principal risks and uncertainties facing the company
The report should provide a balanced and comprehensive view of the company and, where appropriate, include analysis using financial (and non-financial for larger companies) Key Performances Indicators (KPIs).
The review of the business must provide a comprehensive analysis of the development and performance of the company’s business during the financial year and the position of the company’s business at the end of that year. The review must be consistent with the size and complexity of the business.
What are Key Performance Indicators (KPIs)?
Key performance indicators are factors by reference to which the development, performance or position of the business of the company can be measured effectively, as defined in Companies Act 2006. The directors should determine which measures have most reliance as indicators of performance and give reasons why each KPI that has been disclosed is key to the business.
Is a directors’ report still needed?
All companies who have to produce a strategic report also have to complete their directors’ report. Small companies, who are exempt from preparing a strategic report, also have to complete a directors’ report, but with reduced disclosures.
Can principal risks be included in the directors’ report rather than the strategic report?
No. Principal risks are a requirement for the strategic report.
What comes first in the annual report?
Although there are no set regulations on this, guidelines from the Financial Reporting Council (FRC) suggest that the strategic report should be presented at the front of the annual report and the directors’ report at the back.
How can Hawsons help?
Preparing a strategic report could help companies look beyond current year earnings and provide a broader picture of shareholder value creation in their annual reports. At Hawsons we understand the delicate balance between meeting our compliance objectives and providing you with a meaningful, efficient and comprehensive strategic report.
For more information contact your local office specialist or visit www.hawsons.co.uk/strategic-reporting.
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