ACT Letter to the DTI on Operating and Financial Review

The Chancellor has recently announced that the OFR will no longer be a mandatory requirement. The DTI has now published the amending Regulation and at the same time made a corresponding announcement seeking views on certain aspects of the business review that arise out of the EU Accounts Modernisation Directive requirements.

Financial reporting – reporting of numerical out-turns estimated to have arisen from prior operations at a past date – is inherently retrospective. Yet both running a company and making decisions on whether to invest, or maintain an investment in it, are essentially about the future.

The key requirements in the OFR were developed in the UK over many years and included:

• Narrative reporting
• Consideration of trends and risks
• Discussion of matters affecting future performance and the potential for business
  strategies to succeed

We hope that these main thrusts will be retained and encouraged under a voluntary
arrangement.