This article is relevant to companies that report under FRS102 and are not longer considered to be 'small' companies. Generally this means turnover > £10m, balance sheet > £5m and/or more than 50 employees.
What should be included in the strategic report?
All companies are required to include the following three components:
1) Fair review of the business including principal risks and uncertainties
This must contain:
- a fair review of the company’s business; and
- a description of the principal risks and uncertainties facing the company.
The review is required to be a balanced and comprehensive analysis of 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. It is required to be consistent with the size and complexity of the business.
2) Financial key performance indicators (KPIs)
The review of the company’s business as outlined above must, to the extent necessary for an understanding of the development, performance or position of the company’s business, include:
- analysis using financial key performance indicators; and
- when appropriate, analysis using other KPIs, including information relating to environmental and employee matters.
3) Reference to and explanations of amounts included in the annual accounts
For all companies required to prepare a strategic report, that report must, when appropriate, include references to, and additional explanations of, amounts included in the company’s annual accounts
This is a example of a relatively brief report:
A more comprehensive example can be found here, as part of Grant Thornton's illustrative examples of a fictional company:
Real world examples from tech companies we have previously worked with are below:
Finally, the FRC guidance (section 7A) contains a useful, but detailed guide, of how to approach writing the report.