Have your say on the future of UK corporate reporting

The UK Government’s consultation on Modernising Corporate Reporting has already generated considerable debate. Its outcome could be groundbreaking, setting the future framework for corporate reporting in the UK. Other nations are likely to pay close attention to the UK’s approach, particularly as technology continues to change how reporting is prepared, presented and used.

Given the importance of the consultation, we’re gathering members’ views on some of the key proposals in a short survey. These will help shape our response. We’ve have outlined six of the main proposals to consider below.

1. Clarifying the primary users of the annual report and financial statements

Communication should always be targeted at the intended audience. The consultation addresses this head on and proposes that the primary users of annual reports and accounts are investors and creditors, including potential investors and creditors. These groups certainly provide funding, but are they the only two key user groups?

Neither group is homogeneous. For example, there are many different types of investor, each with their own specific information needs. 

2. Reducing the requirements placed on medium-sized companies

The proposed creation of a broader SME reporting regime would remove many of the distinctions between small and medium-sized companies. Medium-sized companies could gain access to a wider package of exemptions currently available only to small companies, including audit exemption.

The consultation seeks evidence on whether the costs of mandatory audits continue to be justified for all medium-sized entities and whether audit exemption could be expanded without adversely affecting access to finance.

The most recent revised company size thresholds took effect for accounting periods commencing on or after 6 April 2025, with the medium-sized company thresholds for turnover and balance sheet total increased from not more than £36m and £18m to not more than £54m and £27m, respectively. Is it right to consider increasing the audit exemption threshold in such a short space of time to £54m?

If introduced what would be the impact on the quality of reporting? What would the impact be on the number of registered audit firms, could this proposal impact on the choice for entities such as charities where audit exemption thresholds are set at a much lower level? Or would it free such companies from what some may perceive as a compliance exercise? 

3. Redesigning the relationship between company law and accounting standards 

The consultation proposes a substantial redesign of the relationship between company law and accounting standards. Currently, detailed financial reporting requirements are spread across the Companies Act 2006, associated regulations and accounting standards.

The proposal would move detailed requirements from legislation into accounting standards, while company law would set high-level principles and determine which standards apply to different categories of company.  

4. Reimagining the applicable accounting frameworks

The Government envisages a streamlined framework based around four principal accounting frameworks: 

• UK-adopted International Accounting Standards (UK-IAS)
• UK GAAP for large companies
• UK GAAP for SMEs
• UK GAAP for micro-entities

This could mean introducing a new standard for SMEs and removing Section 1A of FRS 102. Would the UK GAAP for SMEs still retain its relationship with International Accounting Standards? 

5. Solvency statement

The Government proposes adopting a solvency-based framework that would replace the existing distributable profits and capital maintenance rules for determining whether dividends can be paid lawfully.

If adopted, the proposal would represent a fundamental shift in UK company law and replace complex calculations of distributable reserves with a requirement for directors to confirm that a dividend would not undermine the company's solvency.

A similar approach is used to some degree in other jurisdictions, such as New Zealand and Australia.

6. Embracing digital reporting

The consultation also proposes making electronic communication with shareholders the default option, removing the need to obtain permission before sending documents electronically. Shareholders would still have the right to opt for printed communications. There are also plans to clarify that annual general meetings may be conducted fully virtually, provided shareholders consent.

Further proposals include increasing the use of digital tagging and structured data within annual reports, placing greater emphasis on iXBRL and other machine-readable formats, and considering whether certain disclosures could be migrated from annual reports to corporate websites or digital portals.

The Government is also seeking views on how AI may affect both the preparation and use of corporate reports. This could result in further proposals being considered to ensure that the UK corporate reporting framework is fit for the 21st century. 

Have your say

The survey will take no longer than 15 minutes to complete and will shape our response. We'd appreciate your views before Thursday 15 October.