Avoiding the pantomime horse? Co-ordinating narrative reporting and financial statements
We enjoyed a recent item in Financial Director, reporting on concerns from the Financial Reporting Council (FRC). It has found that climate and other environmental, social and governance (ESG) commitments outlined in narrative and financial reporting do not always match.
“[Company accounts should be careful to] avoid the pantomime horse syndrome where the two halves are clearly written by two different people who didn’t particularly take account of what the other half was saying,” says Janet Locke, senior case officer for the corporate reporting review at the FRC, quoted in the piece. (For those of our readers less well versed in the stranger aspects of British culture, a pantomime horse is a costume worn by two actors – often walking in different directions!)
Noting that climate-related risks will be an important area of focus in the upcoming year, the FRC urges companies to avoid such discrepancies, and to seek balanced disclosures that consider the impact of climate policies and targets on the business as a whole.
Of potential help in this regard, at least for UK issuers, is a new factsheet from the FRC providing guidance on climate-related matters that may need to be taken into consideration when preparing financial statements and associated narrative reporting.