The Financial Reporting Council (FRC) has this week published its updated Regulatory Strategy and finalised Plan for 2009/10.
Updated Regulatory Strategy
The Regulatory Strategy is the definitive published statement on the FRC's role and approach as an independent regulator, including its governance, funding and accountability. It sets out the FRC's regulatory principles and its Strategic Framework and is the basis on which it prepares its annual Plan. The Strategic Framework sets out the desired outcomes which the FRC believes that it and its stakeholders should be working towards to contribute to confidence in corporate reporting and governance in the UK.
Plan 2009/10
A number of the major activities and projects in the Plan are directly related to impact of current tougher economic conditions. Others relate to risks which do not arise directly from those conditions, but have been heightened by them. Major activities and projects include:
- Continue to raise awareness of the risks to confidence in corporate reporting and governance arising from current economic conditions;
- Complete the review of the effectiveness of the Combined Code on Corporate Governance which the FRC announced in March 2009;
- Continue to influence the development of IFRS during a period when a number of key standards are likely to be scheduled for agreement;
- Promote continued support in the EU for maintaining the IASB and other standard setters' ability to exercise independent judgement in setting accounting standards;
- Review a risk-based selection of accounts and directors' reports, focusing on the banking, retail, leisure and travel, commercial property and house-building sectors and others which derive significant revenue from the provision of business services.
- Review narrative reporting in the light of the business review requirements of the Companies Act 2006 and review the need for additional disclosure requirements relating to business models.
- Continue the FRC's work on choice in the UK audit market, including monitoring the implementation of the recommendations of the Market Participants' Group; and consider the need for further action aimed at enhancing the efficiency of the audit market;
- Undertake risk based monitoring and report on the quality of audits, having particular regard to audit issues relating to going concern, fair value accounting estimates and disclosures and the impairment of assets;
- Continue the transition from existing actuarial technical standards to a new suite of standards, including final standards on data, modelling and reporting; and review the implications of the introduction of Solvency II;
- Investigate, and take enforcement action where appropriate, in public interest cases involving members of the accountancy and actuarial professional bodies; and
- Review the effectiveness of the regulatory framework for professional discipline and enforcement of standards, including the FRC's role within the framework.
The FRC will remain alert to the need to respond to emerging developments.
Expenditure and funding
The FRC proposes to operate across the period covered by the Plan at approximately the same staffing levels as in 2008/09. In relation to accounting, auditing and corporate governance, the FRC expects core operating costs to increase by 5% in 2009/10 to £12.5m (including an increase in its contingency reserve to £0.5m to provide some flexibility to deal with additional investigations and cases). This is a reduction of £0.2m compared to the draft budget published in December 2008. In relation to actuarial standards and regulation, it expects core operating costs to increase by 4% to £2.3m. The FRC plans a modest increase in its reserves in 2009/10.