The Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance, has today published its Plan & Budget 2008/09. It is available on the FRC website at http://www.frc.org.uk/about/plans.cfm
The Plan takes account of stakeholder feedback on the draft Plan & Budget 2008/09 published in January 2008. A summary of the feedback received, together with the individual responses, is available on the FRC website at http://www.frc.org.uk/about/feedback.cfm
The feedback received by the FRC supported its assessment that its overall Aim, confidence in corporate reporting and governance in the UK, is currently being achieved, but that there is no room for complacency. The feedback has helped the FRC to refine its assessment of the major risks to confidence and give additional focus to its work programme.
Commenting on the Plan & Budget 2008/09, FRC Chief Executive Paul Boyle said:
“Our Plan & Budget 2008/09 is based on our Strategic Framework, which defines the outcomes we believe that we and our stakeholders should be working towards to promote well-founded confidence in corporate reporting and governance in the UK. The constructive feedback we have received from our stakeholders on the draft Plan has helped us to refine our analysis of the major risks to confidence and firm-up our priorities for action in 2008/09.
We remain alert to developments which could require us to modify our priorities, notably in relation to the implications of current credit market conditions.”
The FRC believes that, in general, preparers, members of audit committees and auditors have been alert to the heightened risks associated with recent credit market conditions and have responded accordingly. But the FRC considers that it is too soon to conclude that these risks have reverted to normal levels. It will continue to monitor developments, including through its reviews of corporate reports and audit inspections. The FRC reminds market participants of the importance of disclosures relating to financing arrangements and the risks and uncertainties in the light of credit market conditions, and auditors’ assessments of fair value and going concern.
The key themes of the FRC’s work programme for 2008/09 are a continuation of those pursued in 2007/08:
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Lead public debate in the UK on the major issues affecting confidence in corporate reporting and governance.
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Monitor corporate reporting and governance practices in the UK and take enforcement action where appropriate.
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Increase participation in the development of international standards and co-operation with international regulatory organisations.
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Contribute to modifying the UK regulatory regime to take account of changes in European and UK legislation.
Major projects in the Plan include:
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Monitor and implement, where appropriate, the recommendations of the Market Participants’ Group aimed at enhancing the efficiency of the UK audit market and mitigating the risks associated with a major firm leaving the market.
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Review the complexity and relevance of corporate reporting requirements and identify opportunities to improve them. The scope of the project includes requirements relating to financial statements, accompanying management commentary and other reports.
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Contribute to the appropriate EU adoption of IFRS to address the risk that the EU might adopt standards which prohibit UUK companies from complying with IFRS as published by the IASB (and thus make their financial reports not comparable with their peers and increase their cost of capital).
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Implement a plan for the transition over the next two/three years from existing actuarial technical standards to a new book of standards based on the conceptual framework which the BAS is in the process of finalising.
The FRC’s Budget for 2008/09 will result in an increase of 9% in its core operating costs in relation to corporate governance, reporting and accounting to £11.9m compared to £10.9m in 2007/08; and an increase of 22% (from a small base) in core operating costs for actuarial standards and regulation to £2.2m compared to £1.8m in 2007/08.
The FRC is currently consulting on its funding arrangements for 2008/09, with a deadline for comments of 30 April. It will announce the finalised arrangements in June 2008.
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