OFR back on the legislative agenda
“We will reinstate an Operating and Financial Review to ensure that directors’ social and environmental duties have to be covered in company reporting, and investigate further ways of improving corporate accountability and transparency.”
- The Coalition: our programme for government
The new government’s commitment to do something about narrative corporate reporting came as almost a big surprise to officials at the department of Business Innovation and Skills as it did to the wider accounting community.
Somewhat mistakenly, environmental and social campaigners had hitched their hopes for more detailed corporate reporting on non-financial activities to the mandatory Operating and Financial Review that was jettisoned from the Companies Act 2006 at the insistence of Chancellor Gordon Brown. Instead of an OFR, the act laid down a non-mandatory requirement for directors to present an enhanced business review that included forward looking performance indicators, comment on social, community and employee issues, and environmental matters.
Reinstating the OFR would give the Liberal Democrats and Conservatives an opportunity that something was being done to encourage sustainability through disclosure, and the BIS confirmed that the Companies Act contained powers allowing the government to amend reporting regulations through secondary legislation.
So, after a period of consultation, a new narrative report could arrive sooner than expected. In the absence of detailed guidance this article returns to many of the points that arose when the mandatory OFR was debated back in 2004-06.