Following a recommendation in the final report of the Management Group for Company Law Review (CLR) (2001) and the Government's response to the White Paper. The statutory underpinning for RS 1 has been removed as a result of the removal of the statutory requirement for the OFR. The Reporting Statement recommends that directors prepare an OFR addressed to members, setting out their analysis of the business, with a forward-looking orientation in order to help members understand the strategies adopted by the entity and the potential for those strategies to to pass, to assess.
KPIs are factors according to which the development, performance or position of the business of the entity can be effectively measured. The OFR should set out an analysis of the business through the eyes of the board.
The OFR should set out an analysis of the business through the eyes of the board of directors
The OFR should focus on matters that are relevant to the interests of members
The OFR should have a forward-looking orientation, identifying those trends and factors
The particular factors discussed should be those which have affected the development, performance and position during the financial year and those which are likely to affect the future development, performance and position of the entity. Given the nature of certain forward-looking information, in particular items that cannot be objectively verified but are made in good faith, the directors may wish to include a statement in the OFR to treat these items with care, explaining the uncertainties they support such information. OFR should comment on the impact on future performance of significant events after the balance sheet date.
The OFR must also discuss predictive comments, both positive and negative, made in previous reviews, whether or not they have been confirmed by events.
The OFR should complement as well as supplement the financial statements, in order to
Where amounts from the financial statements have been adjusted to be included in the OFR, this fact should be highlighted and a reconciliation provided.
The OFR should be comprehensive and understandable
The OFR should be balanced and neutral, balancing both good and bad aspects.
The OFR should be balanced and neutral, dealing even-handedly with both good and bad aspects
The OFR should be comparable over time
This framework is not a template, nor should the elements in paragraph 27 be taken as headings to be included within an OFR. Its purpose is to define the main elements of content that should be addressed within an OFR. It is up to directors to consider how best to use the framework to structure the OFR and the precise content, including the level of detail to be disclosed, in relation to key elements, given the unit's particular circumstances economic.
The OFR should provide information to assist members to assess the strategies adopted by the
To the extent necessary to meet the recommendations set out in paragraph 27 above,
The OFR should include a description of the business and the external environment in which it
Furthermore, when a project has a long-term impact on the environment, this is likely to affect the long-term value and therefore should determine the time perspective for reporting to the OFR. In contrast, a service industry with few physical assets and depending on the provision of specific employee skills for the source of its competitive advantage will plan for a period consistent with its ability to recruit, train and develop staff. hers, which can be much shorter. The OFR must determine the directors' strategies for achieving business objectives.
Disclosure of directors' strategies is recommended so that members can assess current and past actions taken by directors in relation to stated objectives.
To the extent necessary to meet the recommendations set out in paragraph 27 above,
Directors should also consider the extent to which other measures and evidence should be included in
The OFR must describe the significant features of the development and performance of the enterprise in the financial year covered by the financial statements, focusing on those business segments that are relevant for an understanding of the development and performance as a whole. Trends and factors in development and performance suggested by an analysis of the current and previous financial years should be highlighted. Development and performance must be described in the context of the strategic objectives of the company.
The OFR should account for the directors' analysis of the impact on current developments and results of changes during the financial year in the industry or external environment in which the company operates and of developments within the company. For example, changes in market conditions can have an impact on the company's development and results during the period, as can the introduction or announcement of new products and services.
The OFR should analyse the main trends and factors that directors consider likely to impact
This can be narrative evidence that describes how directors manage the business or quantified measures used to monitor the entity's external environment and/. The OFR should cover the essential aspects of the financial performance statements and, where appropriate, should be linked to other aspects of performance. The main trends and factors likely to affect future development and performance will vary depending on the nature of the business, but may include the development of known new products and services or the benefits expected from capital investment.
The OFR should discuss the current level of capital expenditure along with planned future expenditures and should explain how that investment is aimed at helping achieve business objectives. Directors should consider the potential future significance of issues when deciding whether or not to include an analysis of them in the OFR.
The OFR should include a description of the resources available to the entity and how they are
The OFR should include a description of the principal risks and uncertainties facing the entity,
While different industries and entities use different risk models or approaches to identify and manage risk, all entities face strategic, commercial, operational and financial risks and must disclose them when they could have a significant impact on the entity's strategies and the development of the value of the entity. The main risks and uncertainties faced by entities will vary depending on the nature of the business, although some risks, such as reputational risk, are expected to be the same for everyone. The description of the main risks and uncertainties should include exposure to adverse consequences as well as potential opportunities.
OFR should cover the main risks and uncertainties necessary to understand the objectives and strategies of the business, both when they constitute a significant external risk to the economic entity, and when the impact of the economic entity on other parties through activities, products or services of it, affects its performance.
To the extent necessary to meet the recommendations set out in paragraph 27 above,
Strategic alliances with other entities can also affect the entity's performance and value.
Where necessary for an understanding of the business, the OFR should describe receipts from,
The discussion should include comments on short-term and long-term financing plans to support the directors' strategies to achieve the entity's objectives. In addition, the discussion should comment on why the entity has adopted its particular capital structure.
The OFR should set out the entity’s treasury policies and objectives
This can be the balance between equity and debt, the maturity profile of the debt, the type of capital instruments used, the currency, the qualifying capital and the interest rate structure. While a segment analysis of earnings can be an indication of the cash flow generated by each segment, this will not always be the case, for example due to fluctuations in capital expenditures and depreciation. If the segment cash flows deviate significantly from the segment revenues or profits, this must be indicated and explained.
Where relevant, this should include comments on the level of borrowing, seasonal borrowing needs (indicated by the peak level of borrowing in the relevant period) and the maturity profile of both borrowings and undrawn committed borrowing facilities. The discussion of liquidity should discuss the company's ability to finance its current and future activities and stated strategies. The discussion should include internal sources of liquidity with reference to any limitations in the ability to transfer funds from one part of the group to meet the obligations of another part of the group, where these represent or can predictably come to represent a significant limitation on the group.
Where the company has entered into covenants in financing agreements that may have the effect of restricting the use of financing arrangements or borrowings and negotiations are underway or expected to commence with lenders regarding the operation of those covenants. Where a breach of contract has occurred or is expected to occur, the OFR must provide details of the measures taken or proposed to remedy the situation.
An entity should provide information that enables members to understand each KPI disclosed in the
For each KPI disclosed in the OFR
Where a quantified measure, other than a KPI, is included, the OFR should disclose
Consistent with existing practice in informing the markets on such matters, no disclosure of
As this is a Reporting Statement of voluntary best practice, directors are not required to include in
Outline some suggestions and illustrations of the content recommended to be covered in the OFR in relation to the disclosure framework set out in paragraph 27 of the Reporting Statement, and related Key Performance Indicators (KPIs) (paragraphs 38 to 40). As explained in paragraph 27 of the Reporting Statement, the OFR must provide the information necessary to help members assess the strategies adopted by the entity and the potential for those strategies to succeed. The OFR must specifically set out the objectives of the business and the directors' strategies to generate or preserve value for members over the long term.
Definition and calculation: ROCE measures profit as a percentage of the total capital employed (invested) in the business. Purpose: In the mobile network industry, ARPU is one of the main drivers for future revenue growth. Purpose: In the retail industry, sales per square foot is one of the key drivers of future revenue growth.
A number of examples highlighted in the reporting statement can be considered either resources, risks or a relationship, or all. Profile of the interested party and the nature of the relationship (length of the relationship, is it subject to a contract, if so when the contract expires). A company involved in the transportation of hazardous materials may monitor "significant spills" as a KPI because of the potential impact of a spill on the company's reputation.
Source of underlying data: All data from 100% controlled companies representing 85% of the total group based on revenue. Purpose: To assess the effectiveness of managing the company's impact on greenhouse gas emissions. Primary data source: Data from 100% controlled companies in Europe and Africa representing 95% of the company based on revenue.
Source of underlying data: Data from all retail outlets in the group representing 80% of the business on a revenue basis. In such circumstances, it would be appropriate for the OFR to include these performance measures as other evidence, as set out in paragraphs 41 and 42 of the Reporting Statement. Source of underlying data: Annual employee surveys in UK, France and Germany representing 85% of total customer facing employees.
Reserves are reported net of the gas required for processing and transport to the customer.
