Narrative Reporting

Find out how to make the best use of narrative reporting.

What is Narrative Reporting?

Narrative reporting is the other information provided in a company’s annual report that accompanies the accounts including the company’s business model, activities, performance and position, strategy and, depending on the size and listing status of the entity, climate-related disclosures and information on  emissions and energy consumption. 


The Strategic Report & the Directors’ Report

These two “front end” reports are the most important of the narrative reports. You can find out more about the Strategic Report and Directors’ Report on our dedicated page.
 

Corporate Governance Reporting

Companies listed on the Main Market of the London Stock Exchange (LSE)

Companies listed on the Equity shares (commercial companies) category (‘ESCC’) or Closed-ended investment funds category of the LSE Main Market must adopt the Financial Reporting Council’s (FRC) UK Corporate Governance Code on a ‘comply or explain’ basis. These companies must include information on their compliance with the FRC Code in their annual report each year.

Other listed companies, for example, companies listed on the Equity shares (transition) category of the LSE Main Market, are covered by the less stringent rules included in the Disclosure Guidance and Transparency Rules (DTR), which do not specify the code of corporate governance to be adopted and allow companies to make their governance disclosures on the company website, rather than in their annual report.

The FRC issues an annual report on the implementation of the UK Corporate Governance and Stewardship Codes and related developments. The annual reports are available here.

AIM-listed companies

AIM-listed companies must adopt a ‘recognised corporate governance code’. The board of directors are required to publish, on the company’s website, details of which code they apply, explain how the company complies with that code and, where and why it departs from it.

The AIM Rules do not specify a code that must be used but AIM Notice 50, which announced this rule change in 2018, made it clear that it should be “appropriate for a company admitted to a public market”.

It included examples of existing codes such as the Quoted Companies’ Alliance’s Corporate Governance Code (the QCA Code) and the FRC Code. It also suggested that overseas companies, or companies with a second listing on an overseas market, may adopt an appropriate corporate governance code from their home jurisdiction.

Large companies, including privately owned

Outside of the listed-company arena, corporate governance requirements are much more restricted.  A Statement of Corporate Governance is required for individual companies that have:

  1. more than 2,000 employees and/or
  2. turnover of more than £200m and a balance sheet total of more than £2bn, this year and last, or for the past two years.

This requirement excludes those giving a Corporate Governance statement under the DTR or Community interest companies (CICs) or charitable companies.

To support this the FRC published voluntary corporate governance principles designed for large private companies - The Wates Principles. This guidance focuses on wider stakeholder needs and has been drafted on an “apply and explain" basis, meaning that companies adopting it must seek to apply all of the high-level principles and explain how they have done so.

Directors’ Remuneration Report

The UK Companies Act requires ‘Quoted companies’ to include a Directors’ Remuneration Report (the DRR) in their annual report. The DRR must include a breakdown of directors’ remuneration by individual director, and other specific information such as the comparison of directors’ remuneration against employee pay. At least every three years, it must also include the company’s policy with regards to Directors’ remuneration.

AIM Director Remuneration

While AIM-listed companies are not required to produce a DRR, the AIM Rules for Companies do require certain disclosures about directors’ remuneration to be included within the annual report.

Contact us

Your Key Contact

Frederic Larquetoux

Frederic Larquetoux

Partner, Business Services & Outsourcing
View bio

Contact u

Please refer to the Introduction to our Privacy Statement and the Contacts section, which tell you what we do with your personal information, your rights and other relevant information.