From WSJIn its annual review, the Financial Reporting Council found information wanting for 96 companies of the 216 it looked into.

The Financial Reporting Council on Wednesday released its annual review on corporate reporting, finding that many UK businesses need to improve their disclosures on accounting issues such as revenue recognition and liquidity risks.

The regulator for accounting and audit reviewed the annual reports of 216 U.K. companies; it asked 96 of them for more information or explanation.

The review covered a year of annual reports for periods up to Oct. 31, 2019; next year, the coronavirus pandemic’s impact on corporate reporting is expected to be a primary focus.

“Given the heightened need for high-quality disclosures as a result of the Covid-19 pandemic, it is vital companies carefully consider the FRC’s findings ahead of the next reporting cycle,” said David Rule, executive director of supervision at the FRC.

The most significant issues the FRC raised with the companies included how they classified financial instruments and disclosed their liquidity risk and supply-chain finance arrangements. In disclosing liquidity risks, some companies provided insufficient information about their undrawn credit facilities, specifically their terms and the untapped amounts, the FRC said.

The FRC also continued to question companies’ disclosures on recognizing revenue from customers in light of a new rule that took effect for reporting periods beginning on or after Jan. 1, 2018. For example, some companies didn’t provide enough information on the nature of the balances for material contract assets or liabilities, the FRC said.

Prompted by a series of corporate scandals in recent years, the FRC has made efforts to overhaul the audit and accounting sector and improve the quality of corporate reporting. Last year, the U.K. government said the FRC would become part of the Audit, Reporting and Governance Authority, a new regulator with greater resources for enforcement. And in July, the FRC ordered the Big Four professional-services firms to separate their audit wings from their overall business by 2024.

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