Operating and Financial Review

S.I. 2005/3442- The Companies Act 1985 (Operating and Financial Review) (Repeal) Regulations 2005

Following the Chancellor's announcement on 28 November that the Government had decided no longer to require quoted companies to produce a statutory Operating and Financial Review, Alun Michael has now made regulations repealing the requirement. This came into force on 12 January 2006. The requirement to produce a Business Review in the Directors' Report remains.

S.I. 2005/1011- The Companies Act (Operating and Financial Review and Directors’ Report etc) Regulations 2005

The regulations introduce a new requirement in the Companies Act 1985 for directors of quoted companies to prepare an operating and financial review (OFR) for financial years which begin on or after 1 st April 2005.

The OFR must provide a balanced and comprehensive analysis consistent with the size and complexity of the business of:

• The business’s development and performance during the financial year;
• The company’s (or group’s) position at the end of the year;
• The main trends and factors underlying the development, performance and position of the company (or group) and which are likely to affect it in the future.

The regulations also:

• Expand the existing requirement for companies to include a fair view of their business in their directors’ report;
• Establish a requirement for auditors to express an opinion on the consistency of the OFR and directors’ report with the accounts; and
• Establish a criminal and administrative enforcement regime for both the OFR and the directors’ report.

For Guidance Notes outlining the main changes contained in the regulations please visit http://www.dti.gov.uk/files/file21617.doc

The Accounting Standards Board (ASB) has issued Reporting Standard (RS) 1 ‘The Operating and Financial Review’. This is available at http://www.frc.org.uk/asb/press/pub0793.html