In brief
On 29 September 2026, the Financial Reporting Council (FRC) published its Annual Review of Corporate Reporting (“Annual Review”). The Annual Review provides an overview of the FRC’s monitoring activities and findings in 2025/26, its expectations for 2026/27 reports and key reporting developments in respect of the Financial Times Stock Exchange 350 Index (FTSE 350) and other non-listed companies.
The FRC reiterates that high-quality corporate reporting is fundamental to well-functioning capital markets and reaffirmed its commitment to the same, guided by principles of company engagement, proportionate responses, and an integrated regulatory model which it views as directly aligned with the Government Consultation on Modernising corporate reporting (please see our "United Kingdom: Corporate Reporting Reform Consultation Affects Listed Companies" alert on this).
Key findings
Improved reporting quality: the FRC found that the quality of corporate reporting among FTSE 350 companies has maintained, with signs of the gap narrowing between FTSE 350 and non-listed companies. For the second consecutive year, a smaller share of FRC reviews led to substantive questions, which the FRC attributes partly to better reporting by the companies it reviewed. Prior-year restatements requested by the FRC also declined.
Top financial reporting issues: the top five issues identified by the FRC this year all related to financial reporting and accounting requirements. Cash flow statements remained the biggest source of FRC identified errors, particularly due to incorrect classification of cash flows and inconsistencies between the cash flow statement and other disclosures made in the annual report. The other key areas identified were financial instruments, impairment of assets, fair value measurement, and, revenue reporting.
How much is enough: the FRC emphasises that the UK financial reporting framework is principles-based and therefore calls for judgement to be made with preparers having regard to key overarching reporting requirements including that the financial statements must give a true and fair view, the annual report and accounts as a whole should be fair, balanced and understandable (where the UK Corporate Governance Code 2024 applies), and the strategic report must be fair, balanced and comprehensive, as well as other guidance from relevant accounting frameworks.
Monitoring use of AI in corporate reporting: the FRC recently published research on the use of AI in corporate reporting and will keep under review how far AI is being used to prepare reports and accounts, and whether this affects reporting quality. The FRC emphasises that while the use of AI for corporate reporting is increasing, directors remain accountable for the contents of the annual reports and effective oversight and control.
Sustainability disclosures: the Annual Review found fewer substantive issues than previous years in respect of the Task Force on Climate-related Financial Disclosures (TCFD), Climate-related Financial Disclosures (CFD), Streamlined Energy and Carbon Reporting (SECR) and climate-related narrative reporting in 2025/26 which the FRC takes as a sign that companies are becoming familiar with these frameworks. All of this year’s substantive queries concerned the Companies Act 2006 CFD requirements, which many companies are applying for only the second year. However, the FRC still considers that some improvement is needed. For TCFD, the FRC notes limited explanations of performance against targets and of why material Scope 3 emissions were not disclosed and, for CFD, there was a lack of clarity on which emissions targets covered and limited descriptions of climate-related KPIs and how they are calculated.
Key guidance
Expectations for next annual reports and accounts: the FRC re-emphasises the importance of careful judgement in preparing annual reports and accounts, robust review processes, effective mechanisms to assist AI use in corporate reporting, and clear, concise narratives throughout. Strategic reviews should be a fair, balanced and comprehensive review of the company’s development, position, performance and future prospects. Companies should also consider relevant published Thematic review reports and prepare for upcoming changes in reporting standards.
Preparation for future developments: the Annual Review emphasises the importance of companies looking ahead and recommends preparation for future developments such as the International Financial Reporting Standard 18 (IFRS 18) implementation, revisions to the Financial Reporting Standard 102 (FRS 102), Provision 29 of the UK Corporate Governance Code 2024 and Companies House changes to filing from April 2028.
Lily Jones, Trainee Solicitor, has contributed to this legal update.