Included in this issue: FRC discussion paper on preliminary announcements; IA guidance on long-term reporting; Pre-Emption Group monitoring report.

Narrative Financial Reporting

FRC discussion paper on preliminary announcements

The Financial Reporting Council (FRC) has issued a discussion paper focussing on the use and value of preliminary announcements, and the role of the auditor in respect of them. The FRC intend to use responses to the discussion paper when updating its current auditor guidance The paper contains an evaluation of the current auditor guidance in relation to preliminary announcements, reviews current market practice across the main market and AIM and makes various proposals for change, including:

• establishing formal requirements that auditors follow FRC guidance when agreeing to the publication of preliminary announcements;
• extending the scope of the FRC guidance to include voluntary engagements where companies outside the main UK listed market ask their auditors to agree the release of preliminary announcements;
• requiring audits to be complete and the auditor's report on the underpinning statutory financial statements to be signed before preliminary results can be released; and
• including an auditor's report with the preliminary announcement.

Responses are requested by 23 June 2017.

IA guidance on long-term reporting

The Investment Association (IA) has published guidance on long-term reporting directed at companies with shares admitted to the premium segment of the Official List. Other listed companies and those on AIM have been encouraged to adopt the guidance as best practice. The guidance follows the publication in November 2016 of a public position statement in which the IA called for companies to cease reporting quarterly in favour of meaningful long-term reporting.

The guidance sets out IA members' expectations in relation to:

• Business models and long-term reporting. This section outlines expectations on clear and concise business model disclosures, and companies adopting a longer-term approach in their reporting to shareholders. Companies are encouraged to review their current approach to business model disclosures against the FRC Reporting Lab's Business Model Reporting recommendations.
• Productivity. This section outlines expectations on how companies should report on the drivers of productivity within their business.
• Capital management. This section outlines expectations on capital management disclosures, and how companies can improve reporting on the connection between capital management and its long-term strategy.
• Disclosure of material environmental and social risks. This section is based on a modification of the IA's Guidelines on Responsible Investment Disclosure published in January 2007. It refers to disclosures relating to board responsibilities and policies, procedures, and verification systems to manage environmental, social and governance risks.
• Human capital and culture. This section sets out expectations as to how companies should report on human capital and culture.

Companies are encouraged to adopt the guidance at the earliest possible opportunity. IVIS will monitor implementation of the guidance through analysis of annual reports for year-ends occurring on or after 30 September 2017. IVIS will also outline to the IA's members those companies that continue to adopt short-term reporting models, and where companies are not making the desired disclosures as highlighted in the guidance.

AGMs

Pre-Emption Group monitoring report

The Pre-Emption Group (Group) has published a monitoring report looking at the implementation of its 2015 Statement of Principles (Principles) for disapplying pre-emption rights and on the use of the template resolutions for disapplying pre-emption rights that it published in May 2016.

The Principles attempt to provide a framework for early and effective dialogue and is supported by the IA and Pensions and Lifetime Savings Association (PLSA). However, while the Group believes that the Principles and template resolutions have generally been adhered to, possible examples of poor consultation or disclosure have been brought to their attention. For that reason, the Group has included in the report an Appendix of Best Practice in Engagement and Disclosure.

The monitoring report also concludes that:

• The resolution templates are considered good practice by investors.
• A request for general disapplication is likely to be supported where it meets the criteria regarding size, duration and resolution format but that this does not reduce the importance of effective dialogue and timely notification.
• The investor view remains that the additional 5% should not be applied for automatically but only when it is appropriate for the company's circumstances.
• When an additional 5% disapplication is used, investors expect companies to disclose, in the announcement regarding the issue, the circumstances that have led to its use and to describe the consultation process undertaken.