Strategic Report and Directors’ Report

Bevan & Buckland Accountants logoWho does it apply to?

The Companies Act 2006 has been changed, accounts for medium and large companies ending on or after 30 September 2013 with require a strategic report to be included within the directors’ report in your statutory financial statements.

What companies are required to prepare a strategic report?

The directors of a company must prepare a strategic report if:

  1. The company is either a medium or large company i.e. you exceed 2 of the following:
    •  turnover exceeds £6.5m
    • gross assets exceeds £3.25m
    • more than 50 employees
  2. The company is a parent company, and you prepare group accounts.
    • The strategic report must be a group strategic report relating to the undertakings included in the consolidation.
    • The group strategic report may give greater emphasis to the matters that are significant to the undertakings included in the consolidation, taken as a whole.

What happens if we do not prepare a strategic report?

If the directors do not prepare a strategic report, an offence is committed by every person who:

  1. Was a director of the company immediately before the end of the period for filing accounts and reports for the financial year in question, and
  2. Failed to take all reasonable steps for securing compliance with that requirement.

A person guilty of an offence under this section is liable:

  1. On conviction on indictment, to a fine;
  2. On summary conviction, to a fine not exceeding the statutory maximum.

What needs to be included within the strategic report?

The purpose of the strategic report is to inform members of the company and help them assess how the directors have performed their duty under section 172 (duty to promote the success of the company).

  1. Whilst there is no set format, structure or layout for the report, it must contain:
    • a fair review of the company’s business, and
    • a description of the principal risks and uncertainties facing the company
  2. The review required is a comprehensive analysis covering:
    • the development and performance of the company’s business during the financial year, and
    • the position of the company’s business at the end of that year, consistent with the size and complexity of the business.
  3. The review must, for an understanding of the development, performance or position of the company’s business, include:
    • analysis using financial key performance indicators, and
    • where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters. “key performance indicators” means factors by reference to which the development, performance or position of the company’s business can be measured effectively.
  4. If a company qualifies as medium-sized the review only needs to include financial key performance indicators.
  5. The strategic report may also contain any other matters required under section 416(4) to be disclosed in the directors’ report if the directors consider they are of strategic importance to the company.
  6. The report must, where appropriate, include references to, and explanations for amounts included in the company’s annual accounts.
  7. The report does not require information about impending developments or matters in the course of negotiation if the disclosure would, in the opinion of the directors, be seriously prejudicial to the interests of the company.

If you require any more information regarding this please contact either Alison Vickers or Harri Lloyd Davies on 01792 410100 who will be able to assist you further.

Bevan & Buckland Accountants Swansea Tel: 01792 410100

Bevan & Buckland Accountants Haverfordwest Tel: 01437 760666

Bevan & Buckland Accountants Pembroke Tel: 01646 682383

Bevan & Buckland Accountants Carmarthen Tel: 01267 233115

Bevan & Buckland Accountants St David’s Tel: 01437 720352

Bevan & Buckland Accountants Cardiff Tel: 02920 459960

 Bevan & Buckland Accountants Newton Abbot Tel: 01626 361484

 

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