Included in this issue: FRC Reporting Lab report on policy and practice of dividend disclosure, FRS 101 and FRS 102: amendments to notification of shareholders requirements and ESMA revises MAR Q&A in relation to PDMR transactions and investment recommendations
FRC Reporting Lab report on policy and practice of dividend disclosure
The Reporting Lab of the Financial Reporting Council (FRC) has published a report which examines how companies have responded to investor calls for better disclosure of dividends and in light of the Reporting Lab's "Disclosure of dividends – policy and practice" report of November 2015.
The latest report includes a reminder of the findings of the 2015 report and a review of how practice is changing based on a review of dividend disclosures in Annual Reports published between December 2015 and July 2016.
The report highlights elements of good practice disclosures which:
- include details on dividend policy and how it is intended to operate;
- provide insight into factors relevant to the setting of the dividend;
- provide information on dividend resources;
- confirm the sufficiency, availability and potential sources of distributable reserves; and
- bring relevant dividend information together.
The report also sets out areas for improvement given that the Lab suggests that there remain a large number of companies which might benefit from improving this aspect of their communication with investors. Improvements identified often focus on additional disclosure around distributable profits as well as suggesting the need for:
- more detailed disclosure of how dividend policies operate in practice, with more clarity on factors considered in both the setting of dividend policy and in dividend declaration; and
- disclosure of risks and constraints where they impact dividend policy and declaration decisions (especially pertinent to concerns around pension deficits, the potential impact of Brexit and other factors that may have a bearing on capital management decisions).
FRS 101 and FRS 102: amendments to notification of shareholders requirements
The FRC has published amendments to FRS 101 (Reduced Disclosure Framework) and FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland). The amendments remove the requirement for a qualifying entity to notify its shareholders in writing that it intends to take advantage of the disclosure exemptions in FRS 101 and FRS 102. The amendments apply for accounting periods beginning on or after 1 January 2016.
ESMA revises MAR Q&A in relation to PDMR transactions and investment recommendations
The European Securities and Markets Authority (ESMA) has published a revised version of its Q&A relating to the EU Market Abuse Regulation No. 596/2014 (MAR). New questions and answers deal with, among other matters:
- the fact that the transactions of PDMR and those "closely associated" with them should not be aggregated for the purposes of triggering the threshold for notification in Article 19(1) of MAR. However, prevailing market practice is to ignore the threshold and disclose all transactions of PDMR and those closely associated with them;
- how to calculate the price of gifts, donations and inheritance for the purposes of Article 19(1); and
- where shares are received by a PDMR as part of a remuneration package only upon the occurrence of certain conditions, notification in accordance with Article 19(1) is required upon the occurrence of the conditions and the execution of the transaction, as opposed to on entering into the remuneration agreement itself.
Further new Q&As also deal with the various aspects of the MAR investment recommendation regime.