FRC: Annual Review Corporate Reporting 2025/26 Highlights Key Issues

• The FRC Annual Review Corporate Reporting 2025/26 found that FTSE 350 companies maintained high reporting quality, with the gap narrowing for other companies.
• Substantive enquiry letters from the FRC decreased for the second consecutive year, indicating improved reporting standards.
• Common areas for FRC questions included cash flow statements, financial instruments, asset impairment, fair value measurement, and revenue.
• Companies are encouraged to implement robust review processes and ensure consistent, coherent narratives in their annual reports.
• Upcoming regulatory changes include IFRS 18 implementation (effective January 1, 2027), FRS 102 revisions (effective January 1, 2026), and Provision 29 of the UK Corporate Governance Code on internal controls (applicable from January 1, 2026).

Lawyers and compliance officers should advise clients to meticulously review their corporate reporting practices in these identified areas to align with FRC expectations and reduce the risk of substantive enquiries.

The Financial Reporting Council UK recently released its Annual Review of Corporate Reporting 2025/26 on September 29, 2026, providing a comprehensive overview of the state of UK corporate reporting standards. This review highlighted that FTSE 350 companies have successfully maintained a high standard in their corporate disclosures. A positive trend observed was the continued narrowing of the quality gap between larger listed entities and other companies subject to the FRC's oversight.

Despite the overall positive trajectory, the FRC's review identified several recurring areas where substantive questions frequently arose. These critical areas include the presentation of cash flow statements, the accounting for financial instruments, the assessment of asset impairment, fair value measurement, and revenue recognition. These findings underscore specific complexities in financial reporting that continue to challenge companies.

To mitigate these issues and enhance compliance, the FRC encourages companies to implement robust internal review processes. Such processes are crucial for proactively identifying and addressing common technical compliance issues. Furthermore, the FRC emphasizes the importance of presenting all reporting information through a consistent, coherent, and understandable narrative that spans the entirety of the annual report and accounts. Lawyers and compliance officers should advise clients to meticulously review their corporate reporting practices in these identified areas to align with FRC expectations and reduce the risk of substantive enquiries.

Looking ahead, the FRC has signaled significant developments in the regulatory landscape that will necessitate careful preparation from companies. Key among these is the implementation of IFRS 18, which was adopted in the UK on December 10, 2025, and is effective for annual reporting periods beginning on or after January 1, 2027, introducing new requirements for financial statements. Additionally, revisions to FRS 102 are now effective for periods beginning on or after January 1, 2026, impacting a broad range of entities reporting under UK GAAP.

Another crucial change is the introduction of Provision 29 within the UK Corporate Governance Code, which became applicable for financial years beginning on or after January 1, 2026, and specifically addresses material internal controls. These changes will require companies to adapt their reporting frameworks and internal governance structures. Lawyers and compliance officers must prepare their clients for these substantial updates, ensuring they understand the implications of IFRS 18 UK implementation, FRS 102 revisions UK, and the new UK Corporate Governance Code Provision 29.

The FRC's Corporate Reporting Review (CRR) team plays a vital role in supporting companies as they navigate the complexities of modern financial disclosure. By actively promoting examples of good practice, sharing valuable insights across the market, and challenging instances where reporting falls short of required standards, the FRC aims to uphold the integrity of corporate reporting. This commitment is fundamental to maintaining investor confidence in UK businesses.

High-quality corporate reporting extends beyond mere compliance; it serves as a critical mechanism for providing investors with clear, comprehensive information about a company's strategy, inherent risks, and financial performance. Such transparency supports informed investment decisions, strengthens trust within financial markets, and ultimately contributes to the long-term economic growth of the UK. The FRC's ongoing risk-based supervision combined with constructive engagement is designed to foster this environment of high-quality reporting for years to come.

Lawyers and compliance officers should advise clients to review their corporate reporting practices, particularly concerning cash flow statements, financial instruments, and asset impairment, to align with FRC expectations and mitigate risks of substantive enquiries. They must also prepare for significant upcoming changes, including IFRS 18, FRS 102 revisions, and the new UK Corporate Governance Code Provision 29 on material internal controls.

Source: Original reporting via Financial Reporting Council press release