Guidance on the Strategic Report

Promoting transparency and integrity in business


(i)  The aim of the Financial Reporting Council (FRC) is to promote transparency and integrity in business. The FRC believes that encouraging entities to prepare a high quality strategic report – which provides shareholders with a holistic and meaningful picture of an entity’s business model, strategy, development, performance, position and future prospects – is a key part of achieving this aim.

(ii)  The FRC believes the strategic report should be clear and concise and result in fair, balanced and understandable reporting. The guidance is therefore intended to encourage preparers to consider how the strategic report fits within the annual report as a whole, with a view to improving the overall quality of corporate reporting.

(iii)  This guidance incorporates the following requirements relating to the strategic report:

(a)  The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013;

(b)  The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016; and

(c)  The Companies (Miscellaneous Reporting) Regulations 2018.

Aims of the guidance

(iv) The FRC has developed guidance that aims to be: (a) principles-based;

(b)  mindful of recent developments in narrative reporting best practice; and

(c)  aligned with the requirements in the UK Corporate Governance Code.


(v)  The Guidance on the Strategic Report serves as a best practice statement and, as such,has persuasive rather than mandatory force. One of its objectives is to set out high-level principles that enable entities to ‘tell their story’.

(vi)  The guidance is for directors and is intended to serve as best practice for all entities preparing strategic reports.

The annual report

(vii)  The guidance encourages entities to provide information in annual reports that is relevant to shareholders. With that in mind, the guidance is framed in the context of the annual report as a whole. In practice, an annual report comprises a number of components. The information contained in each of these components has different objectives that should guide preparers to where disclosures could be located. The aim is to promote cohesiveness and enable related information to be linked together.

(viii)  In meeting the needs of shareholders, the information in the annual report may also be of interest to other stakeholders. The annual report should not, however, be seen as a replacement for other forms of reporting addressed to other stakeholders.

(ix)  Placement is a key theme in the guidance with a view to providing entities with the building blocks to be innovative in the location of information while working within the regulatory framework. The aims are to ensure that important information is prominent and improve the accessibility of information. The guidance recommends that information that is not relevant for shareholders should be provided outside the annual report where this is permitted by law or regulation.

The strategic report

(x)  The purpose of the strategic report is to provide information for shareholders and help them to assess how the directors have performed their duty, under section 172, to promote the success of the company and, in doing so, had regard to the matters set out in that section. This includes considering the interests of other stakeholders which will have an impact on the long-term success of the entity.

(xi)  The strategic report should reflect the board’s view of the company and provide context for the related financial statements.

(xii)  The guidance recommends that information that is material to shareholders should be included in the strategic report. Immaterial information should be excluded as it can obscure the key messages and impair understandability.

(xiii)  The communication principles suggest that the strategic report should have the following characteristics – be fair, balanced and understandable; be concise; have forward-looking orientation; include entity-specific information; and link related information in different parts of the annual report. There are also principles which recommend that the structure, presentation and content of the strategic report be reviewed to ensure that information remains relevant to the current period. The communication principles are intended to emphasise that the strategic report is a medium of communication between a company’s board and its shareholders.

(xiv)  The content elements for the strategic report set out in the guidance are derived from the Companies Act 2006, and include a description of the entity’s strategy, objectives and business model. In addition, the strategic report must include an explanation of the main trends and factors affecting the entity; a description of its principal risks and uncertainties; and an analysis of the development and performance of the business, including key performance indicators. Entities must disclose information about the environment, employees, social, community, human rights, and anti-corruption and anti-bribery matters when material. There is also a requirement to include disclosures on gender diversity.

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