The FCA has withdrawn the requirement for listed companies to publish quarterly financial reports in a move hailed by the Association of Investment Companies as beneficial for long-term investing.
The change will also meet some of the demands for greater Corporate Governance transparency by campaigners.
Annabel Brodie-Smith, spokesman for the AIC said: “There is an awful lot of information available and we completely support good information. But we did not think that the prescribed format for quarterly reporting offered the best way for investors to be informed about companies.”
From 7 November the FCA removed the requirement to publish interim management statements in compliance with the European Union’s Transparency Directive Amending Directive (TDAD).
The removal of quarterly reporting had been requested by the department for business, innovation and skills following the publication of the Kay Review in 2012.
Written by Oxford University economist Professor John Kay, the report recommended their removal in a bid to encourage long-term investment. The report said: “The meaningful measurement of annual profit requires fine and subjective judgment, and quarterly earnings will be dominated by random fluctuations – or worse, will be managed to avoid them.”
It is understood that approximately 5 per cent of a company’s revenue does not have to be audited, which for a small firm would be in the region of a few thousand, but for a large FTSE 100 company, such as Tesco, this could become millions over the course of time.
When asked, Financial Reporting Council spokesman Sophie Broom would not be drawn on the percentage, but said: “When an auditor signs up they agree to a level of materiality under which they don’t have to pick up mistakes or errors. This is usually a percentage of the revenue of the company which is set at materiality and anything below it they don’t put in their report for the shareholders.”
Adviser view
Gavin Haynes, managing director of Bristol-based Whitechurch Securities, said: “It will certainly be interesting to see how many people observe this.
“I can see the reasons for doing it. Three months is a very short time and does lead to investors taking a short-term approach.
“Different fund managers will see it differently and those taking a longer-term approach will be quite comfortable with it.”
