Description
OFR style information in reporting
OFR – Style Information
Presented by:
Chirag Chauhan Roll No. 303 MBA-Tech (Finance)
What is OFR?
? OFR stands for Operating and Financial Review
? ? An OFR sometimes referred to as ‘management discussion
and analysis’ or ‘management commentary’. ? Forms part of a listed entity’s directors’ report. ? Provides information about the entity’s operations and activities. ? Supplements and complements the information contained in the entity’s annual financial report.
? Preparation for OFR is voluntary for all companies.
? ? Best practice is to follow ASB’s Reporting Statement (RS) :
Operating and Financial Review. ? Only 9% of companies include a formal OFR, in 2008. ? Earlier the statements complied with the requirements of Enhanced Business Review (EBR). ? RS has many similarities with EBR and the demonstration of information where it fits the best is continued in OFR style of information in annual reports.
? OFR should contain an analysis and narrative to supplement and complement the information contained in the financial report.
?
? The operating and financial review is a legal requirement for British quoted companies for financial years beginning on or after April 1, 2005. ? There are certain mandatory requirements that the company needs to follow. ? Its objective is to become more transparent, which in turn helps investors to make more informed decisions.
What is ASB & EBR?
ASB – Accounting Standards Board
• The role of the Accounting Standards Board is to issue UK accounting standards. • The ASB also collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both to influence the development of international standards and to ensure that its standards are developed with due regard to international developments.
?
EBR – Enhanced Business Review
• It is a requirement of the Companies Acts 1985 and 2006 that directors’ reports include an Enhanced Business Review. • This is includes a fair review of the business and a description of the principal risks and uncertainties facing the company.
OFR & EBR - Overlap
?
What's Special about the OFR?
? It comprises of information of entity’s:
? Operations ? Financial Positions ? Business strategies and prospects for future financial years
?
? It requires the Board of Directors to analyze:
? the current performance ? the future development of the business
? Also to report non-financial information such as environmental, social and employee matters.
Survey Conventions & Results
? Formal OFR: Report with the title ‘Operating & Financial Review’. ? ‘Clear OFR Recognition’: Report included chairman’s statement, chief executive’s statement, business & financial review. ? ‘Some OFR Recognition’: Report with detailed chairman’s or chief executive’s statement. ? ‘No OFR Recognition’: Report with basic chairman’s statement & In contrast to 2007, in 2008, smaller no narrative statement. companies have reduced the OFR information they provide.
?
Presentation of OFR
? Criteria: Structure of Report, clear headings and use of color, pictures, tables and charts. ? Directors should sign the responsibility statement
?
? Companies name the person taking the responsibility for the information
? Decreased from 71% in 2007 to 59% in 2008
Content of OFR
? OFR-style information usually had two distinct elements.
? ? The first part included a discussion of the business divisions,
objectives and strategy. ? The second part was a review of the financial information. ? Like the EBR, the RS recommends that the OFR should be balanced and neutral.
?98% of the companies in the 2008 survey which presented
OFR-style information included negative as well as positive points.
Nature of the Business
? ? The RS states that the OFR should include a description of
the business ? It also shows the external environment in which it operates as
? context for the directors’ discussion and ? analysis of performance during the financial year and financial position.
?
Figure shows the extent to which companies described various aspects of their business.
• The companies surveyed included: • good descriptions of their industry (2008: 82%, 2007: 87%) • main products and services (2008: 94%, 2007: 94%) • major markets and competitive position (2008: 85%, 2007: 77%) • business model (2008: 89%, 2007: 87%) • As indicated, the 2008 results were broadly in line with the 2007 survey. • Most annual reports made it very clear what the company did and its operating locations.
Significant Relationships
? ? Companies performed poorly at identifying key dependencies,
including relationship with suppliers and customers.
? 17% in 2008 with compared to 37% in 2007 ? 15% in 2008 and 19% in 2007 disclosed specific information
? These disclosures were made a mandatory requirement under the Companies Act 2006.
Management Team & Structure
? The RS recommends OFR should contain information on the management structure of a company. ? This assists an understanding of reporting lines and business divisions.
? that the
?78%
of companies surveyed did not include this information.
Objectives and Strategies
? RS recommends that OFR should discuss objectives of the business:
? To generate or preserve value over long term ? To set out director’s strategy for achieving the objectives of the business
?
? The headlines generally included under this section are as follows:
? The objectives of the organization ? The strategies implemented to achieve the objectives ? The strengths and resources required and utilized for achieving the objectives ? The developments and performance of the business in the financial year ? Forward looking information
Survey Results
94% included financial objectives 93% included non - financial objectives
?
A considerable rise from the previous year • 66% included financial objectives • 33% included non financial objectives
Objectives and Strategies
?
Example : National Grid PLc
Financial Review
? OFR should also contain a review of the financial position of the company.
?
? The recommended content of this analysis and the percentage of companies including the items are given below:
Information easily available Unusually low comments observed
Companies also included Details of key accounting policies, major acquisitions, disposals, Discontinued operations and shareholder return.
Forward Looking Information
?98% of the OFR style information included some
disclosure about the future. (2008)
? Also included were specific comments on trends and factors that were expected to affect future development, performance and financial position of the business. ? It is a recommendation of RS for OFRs and also a requirement of the Companies Act 2006. ? RS indicates inclusion of forward looking statement and a cautionary statement.
?
Survey Results
?
High due as new companies were included
Low because of the difficult condition of the market
?
THANK YOU
doc_840965253.pdf
OFR style information in reporting
OFR – Style Information
Presented by:
Chirag Chauhan Roll No. 303 MBA-Tech (Finance)
What is OFR?
? OFR stands for Operating and Financial Review
? ? An OFR sometimes referred to as ‘management discussion
and analysis’ or ‘management commentary’. ? Forms part of a listed entity’s directors’ report. ? Provides information about the entity’s operations and activities. ? Supplements and complements the information contained in the entity’s annual financial report.
? Preparation for OFR is voluntary for all companies.
? ? Best practice is to follow ASB’s Reporting Statement (RS) :
Operating and Financial Review. ? Only 9% of companies include a formal OFR, in 2008. ? Earlier the statements complied with the requirements of Enhanced Business Review (EBR). ? RS has many similarities with EBR and the demonstration of information where it fits the best is continued in OFR style of information in annual reports.
? OFR should contain an analysis and narrative to supplement and complement the information contained in the financial report.
?
? The operating and financial review is a legal requirement for British quoted companies for financial years beginning on or after April 1, 2005. ? There are certain mandatory requirements that the company needs to follow. ? Its objective is to become more transparent, which in turn helps investors to make more informed decisions.
What is ASB & EBR?
ASB – Accounting Standards Board
• The role of the Accounting Standards Board is to issue UK accounting standards. • The ASB also collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both to influence the development of international standards and to ensure that its standards are developed with due regard to international developments.
?
EBR – Enhanced Business Review
• It is a requirement of the Companies Acts 1985 and 2006 that directors’ reports include an Enhanced Business Review. • This is includes a fair review of the business and a description of the principal risks and uncertainties facing the company.
OFR & EBR - Overlap
?
What's Special about the OFR?
? It comprises of information of entity’s:
? Operations ? Financial Positions ? Business strategies and prospects for future financial years
?
? It requires the Board of Directors to analyze:
? the current performance ? the future development of the business
? Also to report non-financial information such as environmental, social and employee matters.
Survey Conventions & Results
? Formal OFR: Report with the title ‘Operating & Financial Review’. ? ‘Clear OFR Recognition’: Report included chairman’s statement, chief executive’s statement, business & financial review. ? ‘Some OFR Recognition’: Report with detailed chairman’s or chief executive’s statement. ? ‘No OFR Recognition’: Report with basic chairman’s statement & In contrast to 2007, in 2008, smaller no narrative statement. companies have reduced the OFR information they provide.
?
Presentation of OFR
? Criteria: Structure of Report, clear headings and use of color, pictures, tables and charts. ? Directors should sign the responsibility statement
?
? Companies name the person taking the responsibility for the information
? Decreased from 71% in 2007 to 59% in 2008
Content of OFR
? OFR-style information usually had two distinct elements.
? ? The first part included a discussion of the business divisions,
objectives and strategy. ? The second part was a review of the financial information. ? Like the EBR, the RS recommends that the OFR should be balanced and neutral.
?98% of the companies in the 2008 survey which presented
OFR-style information included negative as well as positive points.
Nature of the Business
? ? The RS states that the OFR should include a description of
the business ? It also shows the external environment in which it operates as
? context for the directors’ discussion and ? analysis of performance during the financial year and financial position.
?
Figure shows the extent to which companies described various aspects of their business.
• The companies surveyed included: • good descriptions of their industry (2008: 82%, 2007: 87%) • main products and services (2008: 94%, 2007: 94%) • major markets and competitive position (2008: 85%, 2007: 77%) • business model (2008: 89%, 2007: 87%) • As indicated, the 2008 results were broadly in line with the 2007 survey. • Most annual reports made it very clear what the company did and its operating locations.
Significant Relationships
? ? Companies performed poorly at identifying key dependencies,
including relationship with suppliers and customers.
? 17% in 2008 with compared to 37% in 2007 ? 15% in 2008 and 19% in 2007 disclosed specific information
? These disclosures were made a mandatory requirement under the Companies Act 2006.
Management Team & Structure
? The RS recommends OFR should contain information on the management structure of a company. ? This assists an understanding of reporting lines and business divisions.
? that the
?78%
of companies surveyed did not include this information.
Objectives and Strategies
? RS recommends that OFR should discuss objectives of the business:
? To generate or preserve value over long term ? To set out director’s strategy for achieving the objectives of the business
?
? The headlines generally included under this section are as follows:
? The objectives of the organization ? The strategies implemented to achieve the objectives ? The strengths and resources required and utilized for achieving the objectives ? The developments and performance of the business in the financial year ? Forward looking information
Survey Results
94% included financial objectives 93% included non - financial objectives
?
A considerable rise from the previous year • 66% included financial objectives • 33% included non financial objectives
Objectives and Strategies
?
Example : National Grid PLc
Financial Review
? OFR should also contain a review of the financial position of the company.
?
? The recommended content of this analysis and the percentage of companies including the items are given below:
Information easily available Unusually low comments observed
Companies also included Details of key accounting policies, major acquisitions, disposals, Discontinued operations and shareholder return.
Forward Looking Information
?98% of the OFR style information included some
disclosure about the future. (2008)
? Also included were specific comments on trends and factors that were expected to affect future development, performance and financial position of the business. ? It is a recommendation of RS for OFRs and also a requirement of the Companies Act 2006. ? RS indicates inclusion of forward looking statement and a cautionary statement.
?
Survey Results
?
High due as new companies were included
Low because of the difficult condition of the market
?
THANK YOU
doc_840965253.pdf