FRC issues updated guidance on the strategic report

The Financial Reporting Council (FRC) has issued updated guidance on the strategic report. This replaces the guidance published in June 2022 and reflects developments since then.

The requirement to prepare a strategic report is set out in section 414A of the Companies Act 2006 (the Act). It applies to all companies, except those that qualify for the small companies' exemption. 

The purpose of the strategic report is to provide information for shareholders and help them to assess how the directors have performed their duty under section 172 of the Act. This duty requires directors to promote the success of the company for the benefit of its members as a whole. In doing so, directors need to have regard to a range of matters, including the interests of other stakeholders as set out in that section.

The FRC guidance is non-mandatory. It’s intended to serve as a proportionate and practical guide for the directors (or members) of all entities preparing strategic reports.

Purpose of the guidance

The guidance aims to: 

• Ensure the strategic report includes relevant and material information that meets the needs of shareholders and other primary users; 
• Set out clear communication principles and encourage entities to present their annual report in a clear and engaging way, that enables them to best ‘tell their story while remaining within the regulatory framework; and 
• Promote greater cohesiveness in the annual report through improved linkage between information within the strategic report and the rest of the annual report. 

Key changes from the previous guidance

The updated guidance reflects:

• Changes to the corporate reporting framework, including changes introduced by the UK Corporate Governance Code 2024, the Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 (SI 2024/1303), the Companies Directors’ Report (Payment Reporting) Regulations 2025 (SI 2025/1152), and other developments in sustainability-related and wider corporate reporting practice.
• Clearer emphasis on the guidance as non-mandatory, good practice guidance and the importance of proportionate application of the legal and regulatory requirements, as appropriate to an entity’s specific circumstances. Mandatory requirements are clearly indicated and distinguished from good practice guidance.
• A stronger focus on the purpose and objectives of reporting, alongside updated communication principles. 
• Improvements to the structure and accessibility of the guidance. The guidance is now structured into separate sections addressing general principles and content requirements in the strategic report, rather than separate sections for different types of entities. 
• Updated scoping tables, previously included as appendices, which are now published separately on the FRC website.  
• Other typographical and presentational improvements.

Effective date

The effective dates of the requirements covered by the guidance vary. The guidance is intended to be used when entities apply the relevant legal requirements.