The main requirements of a strategic report

The main strategic report must contain the following sections as per the Companies Act 2006 s414C:

(a) a fair review of the company’s business;

(b) a description of the principal risks and uncertainties facing the company;

(c) the review required is a balanced and comprehensive analysis, consistent with the size and complexity of the business, of:
(i) the development and performance of the business of the company during the financial year; and
(ii) the position of the company’s business at the end of that year;

(d) the review must, to the extent necessary for an understanding of the development, performance or position of the company’s business, include:
(i) analysis using financial key performance indicators; and
(ii) where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters;

(e) the report may also contain such of the matters otherwise required to be disclosed in the directors’ report as the directors consider are of strategic importance to the company;
(f) the report must, where appropriate, include references to, and additional explanations of, amounts included in the company’s annual accounts;

S172 statement

The strategic report of large companies must include a statement which describes how the directors have had regard to the considerations set out in s172 Companies Act 2006 when fulfilling their duty to promote the success of the company, these being;

(a) the likely consequences of any decision in the long term;
(b) the interests of the company’s employees;
(c) the need to foster the company’s business relationships with suppliers, customers and others;
(d) the impact of the company’s operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly as between members of the company.

The FRC issued guidance that companies who are below the limits for a large company but are not eligible for small and medium company exemptions, such as FCA authorised investment firms involved in MiFID securities, have to include a s172 statement.

Companies are large if they meet at least 2 of the following critieria:

• Turnover of more than £36m
• Balance sheet total of more than £18m
• More than 250 employees

By Mohammed Haque

Mohammed is a chartered accountant (ICAEW) with many years of experience in dealing with complex audit, accounting and tax matters.