Best Practice Guidelines Annual Report and Accounts: printed and online Updated April 2013
About these guidelines The role of the Annual Report continues to evolve. The report has long been the primary source of authoritative information about a company, but it now needs to complement and supplement other information sources, particularly the corporate website. The report also gives companies the opportunity to produce their own authoritative information, particularly important given the significant amount of unverified third-party information available on the internet. These guidelines highlight narrative reporting best practice from a communications perspective and focus on the objectives, content and structure of the narrative reporting section of the Annual Report, recognising its key role in helping an organisation to communicate its strategic progress, performance and personality. We do not cover the technical reporting aspects of the financial accounts section of reports. As the Companies Act 2006 allows companies to provide shareholders with an electronic rather than printed report as default, we include guidelines for both print and online reporting. These guidelines have been compiled with input from industry practitioners and representatives of the major users of Annual Reports – shareholders and equity analysts. They do not seek to interpret regulation or cover statutory requirements, but focus specifically on ways to ensure that communication is effective. (For information on regulatory requirements please refer to the websites listed at the end of the guidelines.)
Contents
Page
Purpose of the Annual Report
2
Key principles for Annual Reports
3
Annual Report – Narrative Reporting Guidelines
4
The Business Review
4
The Directors’ Report
8
Future legislation and regulation in Corporate Reporting
9
Annual Report – printed design
11
Annual Report – online
12
Planning a reporting strategy
12
Navigation
13
Design
13
Other basic elements
14
Added functionality
14
Accessibility
15
The Cookie Law
15
Appendix: The FRRP guide to the contents of a good Annual Report
16
Further information
17
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Annual Report and Accounts: printed and online
Purpose of the Annual Report From an investor and analyst perspective the key objectives of an Annual Report are: • To educate and inform shareholders (potential as well as current) • To set out a strategy and report on how that strategy is being implemented • To report on performance during the period under review and put that performance in the context of the company’s strategy and markets • To explain the risks and factors that could influence the performance of the business • To provide direction and clarity on corporate governance issues, and to explain how decisions on governance are related to the performance and strategy of the business • To fulfil other legal and regulatory responsibilities In addition, many companies see the Annual Report as an opportunity to build their corporate reputation with a wider group of stakeholders and showcase their company to customers, prospective business partners, staff and their local community.
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Annual Report and Accounts: printed and online
Key principles for Annual Reports Simplicity
The Annual Report should be written in such a way that someone without specialist industry or financial knowledge can benefit equally from those that have. It should be laid out coherently and organised in such a way that key information is easy to find and understand. As best practice, make sure the key messages are well highlighted and linked closely to the strategy, risks or another element of relevant reporting.
Targeted
The target audience for the Annual Report includes professional investors (whether they are existing shareholders or not), analysts, retail shareholders, employees and other stakeholders. The use of additional publications can support the effectiveness of the Annual Report in communicating with these broader stakeholders. However, there should be consistency between the different reports recognising the cross-over in use of different materials.
Consistency
Shareholders will expect to be able to track progress on key issues over time and make comparisons with last year. Unless important to communication, try and ensure the style of writing, vocabulary and definitions are consistent across the document.
Connectivity
Clearly demonstrate the strategic linkages between key reporting contents such as KPIs, risk, sustainability and remuneration; this can be achieved both graphically and in the narrative text. Direct linkages between key disclosures not only provides external stakeholders with a holistic view of the business, it also provides internal stakeholders with an understanding of the link between current performance and plans for the future and an insight into how management gains an accurate picture of the extent to which the strategy in place is allowing the company to perform.
Concise
There is a lot to cover in a well prepared Annual Report and the content should be precise and to the point – quantity does not always equal quality. Clear, concise, well structured text should be used with short sentences, keeping in mind that this is a factual, informative document, rather than marketing collateral. Use crossreferencing if attention needs to be drawn to important points.
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Annual Report and Accounts: printed and online
Annual Report – Narrative Reporting Guidelines In this section we provide insight into what’s required to make up the key components of both the Business Review and the Directors’ Report of the Annual Report. Currently the requirements presented concern the Companies Act 2006 and The UK Corporate Governance Code 2012. The Companies Act is to be revised and updated in 2013 and the regulations are required to be met by those companies with financial years ending on or after 30 September 2013. For more information on the updates to the Companies Act please see the ‘Future legislation and regulation in Corporate Reporting’ section of the document on page 9.
The Business Review
The Companies Act 2006 requires all companies, with the exception of small companies*, to produce a Business Review and section 417 of the Act outlines the areas this should cover. The extent to which the key elements of the Business Review have been incorporated in the report needs to be disclosed in the Directors’ Report with suitable cross references to the narrative section. The purpose of the Business Review is to help shareholders assess how the directors have performed in their duty to promote the success of the company for the benefit of its stakeholders as a whole. Best practice will provide an opportunity to develop the quality of reporting rather than including the bare minimum necessary to comply with the legislative requirements; these are summarised below and the full details can be found in the Companies Act 2006 S417 (Source: The Companies Act 2006 www.opsi.gov.uk).
Business Model and Strategy What’s required?
Best practice
Companies Act 2006 ‘a fair review of the company’s business’
Content
Communication
• Highlight how the company generates and sustains value over the short, medium and long term
The UK Corporate Governance Code
• Provide a clear statement of the company’s strategy
• Support qualitative statements with quantitative evidence, using thirdparty data where possible
C.1.2: The directors should include in the annual report an explanation of the basis on which the company generates or preserves value over the longer term (business model) and the strategy for delivering the objectives of the company
• Explanation of how the strategic priorities will be achieved
• Use graphics to express the strategy simply and highlight key linkages
• Commentary that shows how the company’s strategy is delivering performance • Provide a clear understanding on how key performance indicators, both financial and nonfinancial, are used to measure strategic progress • Clear ownership by management of the key issues • Highlight key resources utilised to achieve strategic goals
Market Review What’s required?
Best practice
Companies Act 2006 ‘the main trends and factors likely to affect the future development, performance and position of the company’s business’
Content
Communication
• Clearly highlight the key trends (e.g. cyclicality, seasonal factors) that have and will influence performance
• Provide third-party data to support trends
• Highlight both macro-economic and industry specific trends and how these justify the Group’s performance • Identify any unique features of the company within its market, distinguishing it from peers • Describe the strategic steps that are or have been taken to mitigate the impact of market trends
• Provide a balanced commentary on the risks etc presented by these trends • Use graphics where appropriate (e.g. to demonstrate size of market, company’s market share, position of the company in the market etc)
* A small company is defined as having less than a €7.3m (£5.6m) turnover, a balance sheet of less than €3.65m (£2.8m) and a number of employees up to 50.
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Performance What’s required?
Best practice
Companies Act 2006 ‘analysis using financial key performance indicators’
Content • Clearly define each KPI – what may be common terminology to one sector may not be to others
‘analysis using other key performance indicators including information relating to environmental matters and employees’ matters’ (where appropriate)
• Clearly identify how the KPIs selected measure the strategic success of the business • KPIs should include future targets to demonstrate direction of travel • Explain what risks could have an impact on particular indicators • Detail linkages between KPIs and executive remuneration
Communication • ‘Key’ means key – don’t include every key performance indicator you can think of and obscure the ones that are most important • KPIs should have longevity, i.e. can be used consistently from year to year • Ensure consistency in messaging in relation to other sustainability reporting online or in other publications • Highlight any new KPIs clearly
• Clearly show improvement or decline in performance • Explain positive and negative trends in KPIs • Provide industry benchmarks where possible to give wider context to performance
Segmental Analysis What’s required?
Best practice
Companies Act 2006 ‘the development and performance of the company’s business during the financial year’
Content • Include a personal comment from divisional leaders to demonstrate a sense of accountability
‘the position of the company’s business at the end of that year, consistent with the size and complexity of the business’
Communication • A balanced review of the financial performance for the year which does not hide poor performance and • If multi-year trends are available use them to provides adequate discussion of both present underlying performance positive and negative events or developments • Provide understandable analyses of the key balance sheet measures • Present figure-heavy sections in tabular format for ease of reference • Appropriate review of trading trends and prospects • Include detail on the drivers of operational performance at the divisional, product and regional level • Clearly link the narrative report to the financial results as disclosed (i.e. not adjusted for non statutory items which are not reconciled in the accounts) • Provide a clear outlook specific to that segment, referencing market trends/key risks and uncertainties as appropriate
• Provide a commentary which links performance to the strategy and which is consistent with other communications. Avoid bland statements of the obvious • Reference key trends identified in the market review to support/explain performance
Supply Chain What’s required?
Best practice
Companies Act 2006 ‘information about persons with whom the company has contractual or other arrangements which are essential to the business of the company’
Content • Outline the critical elements of the company’s supply chain and cover important suppliers, partners and joint ventures
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• Describe the processes used to manage risk and sustainability in the supply chain
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Communication • Provide the reader with information about the company’s third-party relationships that have a real impact on performance
Annual Report and Accounts: printed and online Narrative reporting guidelines continued
Governance What’s required?
Best practice
The UK Corporate Governance Code The Listing Rules require companies to apply the Main Principles of The UK Corporate Governance Code and report to shareholders how they have done so
Content • Provide a clear summary of the company’s corporate governance framework
Communication • Use graphs and charts to supplement explanations
• Evidence the integration of corporate governance standards throughout the business
• Provide personal reporting from the board chairman and committee chairmen to demonstrate accountability
• Explanation of the skills and experience of the board members. Explanation of what relevant skills the non-executive board members bring to the • Provide an honest reflection of weaknesses, uncertainties, missed company targets and the lessons learned • Clearly identify any board changes in the period and the effective timings • Present an IR calendar detailing key shareholder events throughout • Evidence that the board has communicated the year effectively with shareholders • Provide a description of the board’s policy on diversity, including gender, and any future targets • Clearly link between directors’ remuneration targets and the company’s financial objectives and discussion of actual remuneration awarded compared to financial performance • Clearly explain the reasons for payments made to former directors • Demonstrate link between business strategy and corporate governance
Risk What’s required?
Best practice
Companies Act 2006 ‘a description of the principal risks and uncertainties facing the company’
Communication Content • Discuss the key risks and uncertainties and how the • Avoid a legalistic approach to narrative and explanation and management have addressed them in order to ‘boilerplate’ disclosure of generic risks minimise their impact on performance, or to exploit them to gain competitive advantage • Diagrams/charts should be included to illustrate the overarching • Identify external risks (which may not be governance structure, risk process etc controllable by management) and internal risks which should be controllable • Quantitative data can also help to articulate clearly the materiality of • Explain risks which may be unique to the business certain risk factors or sector
The UK Corporate Governance Code C.2.1 The board should, at least annually, conduct a review of the effectiveness of the company’s risk management and internal control systems and should report to shareholders that they have done so
• Outline the risk profile and risk appetite of the company
• Consider categorising risks by type (e.g. financial, operational etc)
• Acknowledge opportunities as well as threats
• Use visual aids (e.g. arrows to indicate the change in risk in the year)
• Discuss changes in risks from previous year • Identify the top 2/3 key risks for the reporting period, to direct the reader’s focus to the most topical issues
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Sustainability What’s required
Best practice
Companies Act 2006
Content
Communication
‘information about environmental matters (including the impact of the company’s business on the environment)’
• Provide a clear description of the company’s role in society
• Include important aspects of company’s activities which impact on its corporate reputation
‘information about the company’s employees’ ‘information about social and community issues’
• Provide details of stakeholder engagement processes and identification of the key stakeholders • Use qualitative and quantitative data/non-financial KPIs whilst • Indicate those areas of sustainability which are providing clear targets for future material to the company’s operations with an performance indication of KPIs that are used to measure progress • Provide comprehensive geographic coverage (e.g. not just data from the • Address how sustainability links into risk country where HQ is based) management, executive remuneration, group strategy and the business model • Ensure consistency with standalone reporting, online reporting and the • Include information about any policies of the corporate website company in relation to material issues and their effectiveness • The management statements should include a discussion of the • Identify how the company measures the impact of organisation’s commitment to and its operations in the environment governance of board-level responsibility • Explain how the organisation sets out to recruit, train, motivate and reward and retain talent etc • Demonstrate ownership of sustainability from the governance • Describe the contribution of employees to company team performance – provide case studies and examples rather than platitudes • Provide a clear indication of where targets have been missed, remedial • Explain how the company integrates with the action taken, policies changed and communities in which it operates and ensures that lessons learned operations have a positive impact on them • Make reference to external standards or codes as relevant (e.g. GRI, UN Global Compact, FTSE4Good) • Identify the relevant board/committee member who owns/takes overall responsibility for sustainability in the company • Demonstrate board commitment to sustainability
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• Reference where external assurance has been provided • Provide name and contact details and commitment to response for group, countries, business units and divisions • Use case studies to illustrate sustainability in practice
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The Directors’ Report Corporate Governance
The UK Corporate Governance Code (formerly the Combined Code) sets out standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders. All companies with a Premium Listing of equity shares in the UK are required under the Listing Rules to report on how they have applied the Combined Code in their Annual Report and Accounts. The relevant section of the Listing Rules can be found at: http://fsahandbook.info/FSA/html/handbook/LR/9/8. The Code contains broad principles and more specific provisions. Listed companies are required to report on how they have applied the main principles of the Code, and either to confirm that they have complied with the Code's provisions or – where they have not – to provide an explanation. In September 2012 the FRC issued a revised version of the Code which will apply to financial years beginning on or after 1 October 2012. See here: http://www.frc.org.uk/Our-Work/Codes-Standards/Corporate-governance/UK-Corporate-Governance-Code.aspx
Remuneration
In general the description of performance and reward should try and explain how the remuneration policy links to and supports the achievement of the Group strategy and individual key performance indicators. The Report should also address increases or decreases in remuneration in respect of underlying performance (including those related to prior years). In June 2012, the Department of Business, Innovations and Skills (BIS) announced planned changes to pay reporting in order to enhance transparency in this area of disclosure. For more information on these updates please see the ‘Future legislation and regulation in Corporate Reporting’ section of the document on page 9.
Shareholder data
As well as contact details for queries on dividends, share transfers, voting etc the report should include a section that provides a history of the share price and dividend performance. A history of the company’s capital, including share splits and rights issues and reference values for calculating capital gains tax and indexation should also be provided.
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Annual Report and Accounts: printed and online
Future legislation and regulation in Corporate Reporting Narrative reporting continues to be under the spotlight, with proposed changes from both the UK and EU authorities. In 2013 we will see the introduction of the newly revised UK Corporate Governance Code, which will apply to those companies who have reporting periods beginning on or after 1st October 2012. The revised Code requires companies to report on diversity and provide information and advice on whether the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable.
Updates to the Companies Act
Although regulations only take effect for those companies with financial years ending on or after 30th September 2013, we are likely to see the early adoption of a number of changes which will be made to the current Companies Act. BIS’s ‘Future of Narrative Reporting’ regulations require the Business Review be replaced with a Strategic Report. The Strategic Report’s contents and purpose will be the same as the Business Review’s with the additional requirements for quoted companies to provide information on their business model and strategy. Furthermore, companies will be required to disclose, to the extent necessary for an understanding of the development, the performance or position of their business: • Information about human rights alongside social and community issues; and • A breakdown of the number of persons of each sex who are directors, managers and employees of the company. Managers are defined as persons (other than directors) who are employees and have responsibility for planning, directing or controlling the activities of the company. This provision implements one of the recommendations of the 2011 Lord Davies report on Women on Boards. Additionally, mandatory greenhouse gas (GHG) emissions’ reporting is required and this information will sit within the Directors’ Report. The Directors’ Report will include the same information as currently required, with the deletion of certain disclosures such as charitable donations, principal activities, asset values and the policy and practice of payment to creditors.
Remuneration
The political spotlight continues to shine on remuneration and, in response, the BIS has published ‘Directors' Pay: Revised Remuneration Reporting’ regulations. These look likely to become effective from 1st October 2013, however this date is yet to be confirmed. The revised regulations look to provide greater transparency to the reporting of executive pay and provide shareholders with more power through binding votes. The draft regulations will split the report into two parts, policy report and implementation report, concerning the following: Policy Report: • This part of the report will only be required to be produced when there is a shareholder vote on the policy • New binding vote on remuneration policy • Table setting out key areas of pay and how they support the achievement of strategy • Scenarios for what directors will get paid for performing on, below or above target • Information on percentage change in profit, dividends and spend on pay • Information on exit payments and material factors concerning pay Implementation Report: • Report annually on how policy has been implemented • Single total remuneration figure for each director • Information on total pension payments, exit payments, total shareholdings and other benefits • Information on who advised the remuneration committee
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Annual Report and Accounts: printed and online
Integrated Reporting Integrated Reporting is becoming evermore apparent on the horizon and with the inception of the International Integrated Reporting Council (IIRC) and the Pilot programme helping to build momentum this is likely to become the best practice standard of reporting in the future, providing investors with a holistic and connected view of a business. In April 2013 the IIRC are to publish a Consultation Draft of the integrated reporting framework. The fundamental concept underpinning Integrated Reporting revolves around the creation and preservation of value in the short, medium and long term. Elements which will help businesses to achieve this include the business model and the identification of the critical resources and relationships (sometimes referred to as capitals) on which the business depends for its long-term sustainability. In order to achieve Integrated Reporting, integrated thinking must also be developed. To find out further information on these capitals, the IIRC and the Pilot programme, access the company website at http://www.theiirc.org/
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Annual Report and Accounts: printed and online
Annual Report – printed design The front cover of the Report should present an image or strap line to illustrate a key strength or message of the business and this theme should be reinforced throughout the narrative of the Report.
Imagery
The use of visual aids (e.g. pictures, charts, schematics etc) is a powerful way to convey key messages but it is important to get the balance right. In general, imagery should be relevant to the content and key messages of the Annual Report and Accounts and too many images may make the document too elaborate. Too few leave the document text heavy and unlikely to draw the reader in. Any photography should be captioned to explain its relevance. Graphs, tables and charts should be used where possible to illustrate figures and these should be clearly labelled.
Layout
Not all shareholders have time to review an Annual Report in detail; good use of bullets, shorter paragraphs, highlighted text, visual aids, graphics etc that facilitate access to the information are encouraged. Most shareholders browse through the Annual Report so critical information should be signposted, using quotes, boxed sections and colour to bring key messages to the reader’s attention. Font size should be easily readable, line lengths not too long with the text laid out in columns.
Ten practical suggestions to help shareholders: 1. Make sure contact details and web address are clearly visible in a logical place – e.g. on the back cover. Provide a list of online links or other publications if necessary 2. Make sure the date on the front cover makes it clear which year end is being covered e.g. 31st March 2005 3. Put company name and year end on the spine for easy reference when filed 4. Put company name and year end on every page in case individual pages are copied – particularly relevant when more use is made of online PDF copies 5. Make sure it is clear which section you are in 6. Make sure you adequately highlight the current year in text and tables 7. Don’t bind the invitation to the Annual General Meeting invitation and resolutions into the main report and accounts as shareholders may not notice it. If you do, make sure it is well signposted 8. Relevant reports and directors’ statements should be signed (and accompanied by photos where suitable) to demonstrate ownership and accountability 9. Differentiate the accounts section from the rest of the report so that readers can turn to it easily (e.g. use different colour, stock or a clear tabulation etc.) 10. Use dark tints sparingly as text can be difficult to read and impossible to photocopy
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Annual Report and Accounts: printed and online
Annual Report – online The Companies Act 2006 allows companies to provide shareholders with an electronic rather than printed report as default. While the printed report continues to play an important role, this regulatory change has added to a growing trend towards online reporting. What constitutes an online Annual Report and whether you should include unaudited information such as case studies and videos remains the subject of debate. If you choose to incorporate additional tools and features, you should take care to indicate what is audited. The following best practice guidelines should help companies harness the flexibility of the web to provide shareholders and other users with a rich reporting experience.
The advantages
The online environment provides many opportunities to bring the report and company story to life. It also enables companies to track how report content is used and read. An effective online report should offer users tools and features that will help them better understand the company’s story – its products, strategy and performance – and other key issues. A best practice report will: • Optimise the report for web and link to other sources of information or dynamic content, such as the corporate website • Improve user experience through interactive tools, diagrams, charts, videos, notes, image galleries and feedback • Link to related information throughout the report – giving users a greater choice of how they read and interact with your content • Provide multiple formats to meet the diverse needs of users. Investors have different reasons and needs for visiting online Annual Reports. The more options they have for viewing, printing and accessing information the better: – HTML for quick and searchable access online – Excel downloads of financial data – PDFs to read or store offline • Use web analytics software to see how users navigate the report and which areas and pages are most popular • In the long run a successful online strategy can provide reputational benefits
Planning a reporting strategy
• Companies should plan their reporting as a whole, rather than separating out the printed and online reports: – Consider how all the reports fit together (e.g. Annual Report, annual review, sustainability report, integrated report) and how to present this information online – Where content overlaps in the printed reports, the online environment provides an opportunity to bring the information together – Consider all the audiences for your online report and what their needs and requirements are • Ensure that the online reporting project is considered in tandem with the printed version: – Allow a realistic time for the build and review of the online report – Plan the site map alongside the print page plan to decide how information best fits together – Promote online channels in printed materials and explain the tools and additional information available online • Information should be available simultaneously to everyone, ensuring equal access. This can be achieved by: – Ensuring that the Annual Report is available online on the same day the printed document is mailed – Notifying shareholders by email that the report is available online and providing them with a direct link to the report – Updating the corporate website to promote the online report and ensure the corporate website reflects the latest information in the Annual Report – Use social media channels to announce the report publication
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Navigation An online report should be easy to navigate and intuitive to use. Key points to consider include: • Users should be able to see where they are in the report at all times. Highlight the currently chosen navigation and include clear page headings • The navigation should not be too long with too many options as this can confuse the reader. Consider alternatives, such as on-page navigation through tabs and click/reveals, pop-ups where appropriate • Users should be able to navigate through the report by going from one page to the next as if they were reading the printed version. This can be achieved by having next and previous page options in addition to the menu navigation • Users may want to ‘dip in and out’ of the report to find answers to specific questions. Structure the information so that users can see a clear overview first and can then go further into the report if they want more details. This principle can also work well for individual pages • Links should direct users to related areas of content both within the report and on the corporate website, making it clear where the user will go if they follow the link so that they do not end up at dead ends or going round in circles • Use recognisable labelling and standard industry terms • Consider including a breadcrumb trail at the top of each page (e.g. Home > Investor relations > Corporate Governance). Note that this should not be the main method of navigation as users will tend to overlook it • Provide multiple navigation routes to the same content – a private investor may well need a different route from an institutional one • Improve the value of information by allowing visitors to traverse it in multiple ways, for example by categorising press releases and providing filtering by year
Design
The design of the online and printed Annual Reports should be in harmony but each should be tailored for its particular medium. Consider the following: • The design should reflect the company’s online identity and be part of the family of sites • Online is a fundamentally different medium, requiring a more fluid approach to design: – Less space is immediately visible – The standard page layout is landscape as opposed to portrait – Double-page spreads and large images in print need to be fundamentally rethought for web – The impact of design will vary depending on the viewer’s screen resolution – Tabs and click-and-reveal options allow more information to be presented ‘above the fold’ (i.e. without the need to scroll) – Colours and fonts should be suitable for the web – what works in print may not be accessible online • Graphics, pictures and tables are important communication elements in Annual Reports. Careful consideration must be given to the use of colours, shading and typography to ensure that this information is legible and works on a screen • Text-heavy graphic elements should be recreated in HTML, not as images, which can be hard to read and are likely to impair accessibility • Think about how best to support users of mobile devices: touch screens require large click areas rather than small text links, and consider supporting small screen devices like smartphones through a responsive version of your site • Avoid web pages that take a long time to load and repetitive animation that can distract attention
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Annual Report and Accounts: printed and online Annual Report – online continued
Other basic elements The following elements are a reasonable minimum for a best practice online Annual Report: • Give the report an identifiable and memorable URL, e.g. www.YourCompanyName.com/AR2011 • If your investor section is supplied by a third party then try and ensure that its URLs follow the same pattern as the rest of your website • Ensure that the website homepage shows the most relevant investor information • Remember that references to page numbers within the printed report will have no context online and should be replaced by hyperlinks to that content • Provide quick links to financial information • Provide links from the notes to the main content and vice versa – notes may work best as pop ups so that the user does not have to click back and forth • Links should be descriptive where possible – avoid using ‘Click here’ • Ensure the report works for different internet browsers (especially Firefox and Internet Explorer for PCs and Firefox and Safari for Macs)
Added functionality
Companies can bring the report to life through various features and tools. Best practice examples include: • Landing pages with dynamic elements to highlight key messages • Video introduction from the CEO and management with accompanying transcripts • Interactive diagrams – allowing for greater depth of information and clarity of explanation • Analyser tools and KPI charts to enable users to drill in to the data • Enhanced search mechanisms, for example highlighting the most popular pages or providing richer contextual search results • Excel downloads of financial data • Report tools: – Notes that can be added, saved, downloaded or printed – Print basket – Download kits – Save a page function that allows users to print, download or email particular pages – Interactive glossary to explain financial and technical terms • PDF cut-ups that allow users to choose and print the sections they are interested in • Introduction in multiple languages • Guide to financials to help understand the numbers • Feedback functionality such as enabling users to submit questions and publishing the responses online or conducting an online survey. Monitor the feedback and take appropriate steps where necessary • Social media sharing tools making it easy to link to social media sites and applications • QR codes to promote content from the printed Annual Report that is enhanced within the online Annual Report, e.g. CEO videos
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Accessibility The Equality Act came into force in October 2010, replacing the Disability Discrimination Act (DDA) in England, Scotland and Wales. To comply with this legislation all websites must be fully accessible. This means a corporate website must be designed to allow equal access to information and services to all users, including those with visual, hearing, cognitive and motor impairments. Under the new Act, the threshold has been lowered. In the future, a person with disabilities must not be put at a “substantial disadvantage”, compared to a non-disabled user. Previously, it had to be “impossible or unreasonably difficult” for a disabled user to use a service. The lower threshold means that the obligation to make reasonable adjustments is now more onerous on website owners and hosts. The British Standards Institution has produced a standard to help website designers with the new rules. BS 8878: • Provides guidance on how to assess the impact different technologies can have on your customers • Outlines your legal responsibilities in relation to web accessibility so you can assess what to do to achieve compliance • Contains text that organisations can extract and use in their accessibility or procurement statement The standard can be purchased here http://shop.bsigroup.com/ProductDetail/?pid=000000000030180388 The W3 Web Accessibility Initiative has published a widely accepted set of accessibility guidelines. There are three different priority levels of accessibility and best practice is to aim for Level AAA conformance, which is the most accessible. While it is not always possible to achieve the highest level of accessibility, companies should ensure that they make every effort to make the website as accessible as possible. Visit the W3 site for more information: www.w3.org/standards/webdesign/accessibility or the RNIB website: http://www.rnib.org.uk/professionals/webaccessibility/pages/web_accessibility.aspx
The Cookie Law
The Privacy and Electronic Communications (EC Directive) Regulations 2003 covers the use of cookies and similar technologies for storing information. This was updated by the UK Government on the 26th May 2011 to align with a new EC directive. The deadline for compliance was 26th May 2012. The updated directive prevents information (e.g. cookies) being stored on people’s devices without their knowledge and consent. The directive states that cookies or any other similar technologies (e.g. web beacons/web bugs/clear GIFs) cannot be used unless: • The user has been told clearly that the cookies are there • They have been given a clear and comprehensive explanation of what the cookies are doing • They have explicitly given their consent for them to be stored on their device There have been a number of interpretations of this across corporate websites and we would recommend that you check your company policy on how best to meet these requirements.
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Annual Report and Accounts: printed and online
Appendix The FRRP guide to the contents of a good Annual Report A Good set of Report and Accounts
Beyond basic compliance with the fundamental requirements of the law and accounting standards and the need for complete and accurate publication of accounting information, there are characteristics of corporate reporting which the Panel believes make for a good Annual Report.
A single story
The narrative in the front end is consistent with the back end accounting information; significant points in the financial statements being explained in the narrative reports so that there are no surprises hidden in the accounts.
How the money is made
The business review gives a clear and balanced account which includes an explanation of the company’s business model and the salient features of the company’s performance and position, good and bad.
What worries the board
The risks and uncertainties described in the business review are genuinely the principal risks and uncertainties that the board are concerned about. The descriptions are sufficiently specific that the reader can understand why they are important to the company. The links to accounting estimates and judgements are clear.
Consistency
Highlighted or adjusted figures, key performance indicators (KPIs) s and non GAAP measures referred to in the business review are clearly reconciled to main heading figures in the accounts and any adjustments are clearly explained, together with the reasons why they are being made.
Cut the clutter
Important messages, policies and transactions are highlighted and supported with relevant context and are not obscured by immaterial detail. Cross-referencing is used effectively; repetition is avoided.
Clarity
The language used is precise and explains complex accounting and reporting issues clearly; jargon and boiler plate are avoided.
Summarise
Items are reported at an appropriate level of aggregation and tables of reconciliations are supported by, and consistent with, the accompanying narrative.
Explain change
Significant changes from the prior period, whether matters of policy or presentation, are properly explained.
True and fair
The spirit as well as the letter of accounting standards is followed. A true and fair view is a requirement of both UK and EU law and applies equally to accounts prepared in accordance with UK GAAP and IFRS.
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Annual Report and Accounts: printed and online
Further information Accounting Standards Board
Rising to the challenge – a review of narrative reporting by UK listed companies http://www.frc.org.uk/asb/technical/projects/project0108.html
Financial Reporting Council
The UK Corporate Governance Code http://www.frc.org.uk/documents/pagemanager/Corporate_Governance/UK%20Corp%20Gov%20Code%20Jun e%202010.pdf
Effective Company Stewardship – Enhancing Corporate Reporting and Audit
http://www.frc.org.uk/images/uploaded/documents/Effective%20Company%20Stewardship%20Final2.pdf
The Financial Reporting Review Panel
Annual Report 2011 http://www.frc.org.uk/images/uploaded/documents/FRRP%20Annual%20Report%202011%20final.pdf
The Companies Act 2006 www.opsi.gov.uk
Deloitte
Gems and jetsam – Surveying Annual Reports http://www.deloitte.com/view/en_GB/uk/services/audit/9531b48367b13310VgnVCM1000001a56f00aRCRD.htm
PricewaterhouseCoopers
Reporting survey 2011: From compliance to competitive edge http://www.pwc.com/gx/en/corporate-reporting/reporting-survey-2011-from-compliance-to-competitive-edge.jhtml Integrated Reporting – What does your reporting say about you? http://www.corporatereporting.com/integrated_reporting_2010.pdf
Online reporting
www.reportleadership.com
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