UK: Insights from the FRC Annual Review of Corporate Reporting

Why should I read this?

The Financial Reporting Council (FRC) has published its latest Annual Review of Corporate Reporting, (Corporate Reporting Review) setting out the findings from its monitoring of corporate reporting during the year ended 31 March 2026. The review highlights areas where reporting quality has improved, identifies the most common reporting issues raised with companies and sets out the FRC's expectations for the upcoming reporting season.

Subsequently, the FRC published a thematic review of company reporting on recognised and unrecognised intangible assets and other intangible "value drivers".

Scope and key findings

For the Corporate Reporting Review, the FRC reviewed the annual reports and accounts of 248 entities, with FTSE 350 companies making up slightly less than half of reviews and the remainder including AIM companies and large private companies. The proportion of reviews resulting in substantive enquiries fell for the second consecutive year. The FRC reports that overall reporting quality has been maintained among FTSE 350 companies and that there is evidence that the quality gap between FTSE 350 companies and other companies is narrowing. Fourteen companies were required to restate aspects of their accounts, four of which affected profit.

The FRC will continue to adopt a proportionate and risk-based approach to supervision and noted that it did not exercise its formal review powers during the year, generally engaging with companies on a voluntary basis.

(i) Focus on common reporting issues

The Corporate Reporting Review identifies the following as the five most common areas in which the FRC raised substantive questions with companies during 2025/26:

1. Cash flow statements
2. Financial instruments
3. Impairment of assets
4. Fair value measurement
5. Revenue

Cash flow statements returned to the top of the list for the first time in four years and remained the most common source of restatements following FRC review. The FRC noted that the most common issues continue to relate to the classification of cash flows within the cash flow statement. 

While the number of impairment-related enquiries decreased, impairment continues to be a significant area of focus. Similarly, financial instruments and revenue remain common areas of challenge, particularly where disclosures lack sufficient detail or are not tailored to the company's circumstances. Fair value measurement entered the top five for the first time, partly driven by the FRC's thematic review of investment trusts and similar vehicles.

(ii) Expectations for annual reports and accounts

The FRC sets out a number of headline expectations for companies preparing their next annual reports and accounts. In particular, companies should ensure that:

• there is a robust review process in place to identify common technical compliance issues;
• effective oversight and control are maintained where AI is used in the reporting process;
• the annual report and accounts present a consistent and coherent narrative and remain clear, concise and understandable;
• accounting policies are sufficiently company-specific and include all material information;
• the strategic report provides a fair, balanced and comprehensive review of the company's development, performance, position and future prospects;
• relevant findings from FRC thematic reviews are considered where applicable; and
• adequate preparation is undertaken for forthcoming changes in reporting requirements and accounting standards. 

(iii) AI and corporate reporting

The FRC notes the increasing use of AI in the preparation of corporate reports and accounts and reminds companies that responsibility for reporting remains with companies and their directors. The review stresses the importance of maintaining appropriate oversight and controls where AI tools are used as part of the reporting process. 

(iii) Preparing for regulatory change

Although reporting requirements remain relatively stable for many companies in the immediate reporting cycle, the FRC highlights a number of significant developments that companies should already be preparing for.

These include:

• For listed companies, the implementation of Provision 29 of the UK Corporate Governance Code 2024 for periods beginning on or after 1 January 2026;
• revisions to FRS 102 affecting accounting for revenue and leases; and
• IFRS 18 Presentation and Disclosure in Financial Statements, which applies for periods beginning on or after 1 January 2027.

The FRC expects companies to be well advanced in assessing the impact of these developments on future reporting.

Thematic review: reporting on intangible value drivers

On 14 October, the FRC subsequently published a thematic review of company reporting on recognised and unrecognised intangible assets, and a wider range of intangibles, such as workforce and customer relationships, which the FRC describes as a review of intangible value drivers.

This thematic review focuses on the strategic reports of a limited sample of companies, and notes the increased importance of intangible value drivers given increasing investments by many companies in new technologies. The FRC's report sets out (at section 6) several key recommendations to help companies improve reporting in this area.

This includes encouraging companies to better explain how their key intangible value drivers support their business model, strategy and future performance. The review also encourages companies to improve connectivity between the strategic report and the financial statements, ensuring that, relevant information is consistent and connected across the annual report.

Next steps

Companies should consider the FRC reviews and whether any action is required ahead of the next reporting season. In particular, boards and reporting teams should:

• review reporting processes to identify common technical compliance issues;
• ensure appropriate governance and oversight arrangements are in place where AI is used;
• revisit disclosures relating to cash flow statements, financial instruments, impairment, fair value measurement and revenue;
• ensure annual reports provide a coherent and company-specific narrative; and
• continue preparations for upcoming changes to accounting and corporate reporting requirements.