Following Gordon Brown's intervention of November 2005 and subsequent backtracking, current guidance on mandatory non-financial reporting is in a state of flux. In the short term, a number of different reporting paths are available. While a longer-term answer should come from the DTI's 'what comes next' consultation on Mandatory Narrative Reporting which continues to 24th March 06. Key issues for consideration are the use of forward-looking statements, risk-based reporting and the inclusion of social and environmental information.

OFR is still an option
The continuation of a well advanced OFR is a realistic approach for many quoted companies. Even for those companies with less well developed plans, a voluntary OFR- based on revised OFR advice from the UK Accountancy Standards Board- offers many benefits in terms of simplicity and audience usability. Forum for the Future report that many companies are choosing to take this voluntary approach.

Business reviews are required
Those companies not previously covered by the OFR requirements should realise that compliance with the EU Accounts Modernisation Directive (2003/51/EC) still applies. This obligation is to provide a 'business review' within the annual Director's Report.

The business review covers principal risks and uncertainties as well as giving a balanced and comprehensive analysis of the business. Actual requirements of the business review vary with the complexity and size of company; but broadly it must cover information that is material to understanding the development, performance and position of the company, and the principal risks and uncertainties facing it. This will include information on environmental matters and employees, on the company's policies in these areas and the implementation of those policies.

Back to front
Many reporters would find the business review fits more easily into the front end of the traditional report, however its inclusion in the Directors' Report is mandatory. Repetition is a potential and indeed was one of the problems the OFR sought to avoid.

Quoted companies must act
So, until further notice, quoted companies can opt for a voluntary OFR or expand the Directors' Report section of their annual reports to include a business review. The DTI web site shows the differences between the two requirements . Those that take no action can expect their Directors to face a fine, irrespective of the continuing legislative changes in this area. For further information about Sd3's reporting service and how to meet these new requirements please click here.
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