The Financial Reporting Lab, part of the Financial Reporting Council (FRC), has launched a project to examine dividend disclosure policies at companies as part of an initiative to improve communication and transparency at listed companies.
Reporting on dividends is ‘highly relevant’ as a result of changes to the strategic report and the reporting of solvency and liquidity risks, according to the Lab, and investors want more clarity and transparency in this area, given the increased use of fair values in accounting which increases the complexity of assessing which profits are distributable.
The project will explore the communication by companies at the group/holding company level regarding any significant constraints on dividends, such as structural, legal, accounting, tax, operational or other considerations that could prove limiting to the conversion of profits to a flow of cash dividends to shareholders; and the nature of the company’s dividend policy and how the policy relates to its strategic objectives and the company’s capacity to pay dividends.
The FRC is looking for a number of listed companies to get involved in the project to show how they highlight disclosures in their annual reports, investor presentations or on websites, and to discuss the thinking behind their approach on the content and presentation of information. The examples provided will be tested with the investment community through a series of meetings organised by the Lab.
Interested parties should contact the Lab before 30 April to register their interest. Email FinancialReportingLab@frc.org.uk.
Alternatively, contact Sue Harding on 020 7492 2442 or Marian Williams on 020 7492 2428.
The report on dividends will be published by the FRC in the second half of 2014.