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ANNUAL REPORT AND ACCOUNTS OF THE FINANCIAL REPORTING COUNCIL

- INCLUDING THE REPORT OF THE INDEPENDENT SUPERVISOR

YEAR TO 31 MARCH 2015

The Report of the FRC as the body designated by a delegation order under section 1252 of the Companies Act 2006 and the Report of the Independent Supervisor is presented to Parliament pursuant to sections 1231(3) and 1252(10) of, and paragraph 10(3) of Schedule 13 to, the Companies Act 2006.

Accounts presented to Parliament by command of Her Majesty.

The Report of the Independent Supervisor is also presented, pursuant to section 1231(2), to:

  • The First Minister in Scotland;
  • The First Minister and Deputy First Minister in Northern Ireland; and,
  • The First Minister for Wales and is laid before the National Assembly for Wales pursuant to section 1231(3A) of the Companies Act 2006.

Contents

Our mission

Our Mission

To promote high quality corporate governance and reporting to foster investment

Our Values

We work in the public interest, seeking at all times:

  • • to be joined up to make the most of the breadth of our role
  • • to reach out to our stakeholders to secure their expertise
  • • to be evidence-based to ensure our decisions are soundly-reached and respected
  • • to be decisive to ensure problems are addressed in a timely manner
  • • to show respect to others; recognising the value in different perspectives
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Chairman's Statement

Sir Winfried Bischoff - Chairman
Sir Winfried Bischoff - Chairman
The fact that successive governments and the market have asked the FRC to take on additional responsibilities suggests that we have a track record of exercising them effectively. But no matter how good our past record has been, we cannot take our future success for granted.

2015 marks the FRC’s 25th anniversary. Originally established in 1990 to be responsible for setting and monitoring UK accounting standards, the organisation has evolved significantly since then. We have taken on an increasing range of responsibilities, which now also cover corporate governance and investor stewardship, audit and assurance, actuarial work and oversight of the accounting and actuarial professions, and have grown as a result. However, we are and wish to remain a relatively small organisation, even though we will expand further if we are asked to become a competent authority for the regulation of the audit profession under the EU Audit Regulation and Directive

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The fact that successive governments and the market have asked the FRC to take  on additional responsibilities suggests that we have a track record of exercising them effectively. But no matter how good our past record has been, we cannot take our future success for granted.

When I succeeded Baroness Hogg as Chairman in May 2014 after her four successful years in the role, I was keen to make my own assessment of whether we are well placed to deal with the challenges ahead. We set in hand the necessary work to develop our next three year strategy, for 2016/19, including the way we raise our funds and develop our people. We are evaluating the impact of the reforms to our structure and statutory powers in 2012. And we have instituted a review of the effectiveness of our monitoring of the quality of corporate reporting and auditing.

I have personally spoken to many of those we regulate, those who benefit from our activities, and those whom we seek to work with and influence. We have also undertaken a stakeholder survey to understand better how we are viewed.

Overall the feedback has been positive. The FRC is seen as being close to the markets, consultative and willing to listen, with greater coherence and focus to our structure and statutory powers than before the 2012 reforms. We are also seen as influential by those organisations we deal with in the EU and internationally.

Of course, there is room for improvement. In common with other regulators, we have begun to see signs of regulatory fatigue amongst those with whom we deal. We also heard that we need to do more to understand the views of, and impact of our work on, investors.

During the year we undertook an internal review of the effectiveness of our board, committees and advisory councils, and assessed progress following the independent evaluation carried out in 2013/14.

In addition, the Nominations Committee has reviewed the FRC's non-executive succession planning across the full governance structure. We concluded that the skills and stakeholder representation were appropriate but identified the need to appoint to the Board individuals with actuarial experience and experience in the non-listed sector. I am pleased that John Coomber and Ray King will join the Board shortly. Ray will now chair the Audit and Assurance Council and both will join the Codes & Standards Committee.

While we will not underestimate the challenges facing us, I believe we are in a good position to cope with them.

In developing our three-year strategy for 2016/19 we must not lose sight of our primary mission to foster investment and must keep the needs of investors at the front of our mind. We need to remain focused on our priorities, measuring success by the impact we make, not by our level of activity. We need to maximise that impact by continuing to work collaboratively with fellow regulators and others such as the professional bodies. We need to avoid imposing unnecessary burdens on those we regulate, taking a non-regulatory approach wherever possible, being particularly mindful of any adverse impact on small, growing companies.

We will continue to improve how we communicate with all of our stakeholders, including a number of initiatives focussed on the investor community. We are particularly keen to engage closely with Government and Parliament to ensure there is good understanding of our work and its effectiveness. And we need to make sure we have the right structures, people and resources to carry out our responsibilities effectively and efficiently.

Our approach to governance has enabled us to focus on key strategic issues, with our Board, Committees and Councils taking on much of the 'heavy lifting' on matters that require detailed scrutiny. This has enabled us to make further progress in delivering the priorities we set for our 2013/16 strategy - including updating the UK Corporate Governance Code to promote a clearer focus on risk, internal control and the assessment and reporting of companies' longer-term viability.

I should like to take this opportunity to thank the many Committee and Council members who support the work of the Board and also to thank Stephen Haddrill and the executive team for their continuing support and commitment.

In January 2015 we announced that Jim Sutcliffe had stood down from the Board and from his Chairmanship of the Codes & Standards Committee, having formerly served as Chairman of the Board for Actuarial Standards. His contribution in these capacities has been highly valued. John Stewart stood down from the Board and the Codes & Standards Committee from July. I would like to take this opportunity to thank both Jim and John for their advice and commitment to the work of the FRC.

Sir  Winfried Bischoff

Chairman
13 July 2015

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Chief Executive's Strategic Report

Overview

Stephen Haddrill - Cheif Executive
Stephen Haddrill - Chief Executive
We aim for our codes and standards to be adopted because companies, their investors and the professions believe they make sense.

Our Mission

The FRC's Mission is to promote high quality corporate governance and reporting to foster investment. A secure flow of investment into the UK's capital markets, driven by high quality governance and reporting, helps underpin the growth of our economy and our competitiveness.

Our work is designed to encourage the provision of trustworthy information to investors and to encourage trustworthy behaviour by boards of companies and the professions. In addition, we seek to build justified confidence internationally in the UK regulatory framework for corporate governance and reporting.