Table comparing the requirements of the Business Review and the Operating and Financial Review

Operating and Financial Review (Schedule 7ZA of the Companies Act 1985)

Directors’ Report: Business Review (Section 234ZZB of the Companies Act 1985)

1. An operating and financial review must be a balanced and comprehensive analysis, consistent with size and complexity of the business, of -

(a) the development and performance of the business of the company during the financial year,

(b) the position of the company at the end of the year,

(c) the main trends and factors underlying the development, performance and position of the business of the company during the financial year, and

(d) the main trends and factors which are likely to affect the company’s future development, performance and position,

prepared so as to assist the members of the company to assess the strategies adopted by the company and the potential for those strategies to succeed.

2. The review required is a balanced and comprehensive analysis:

(a) the development and performance of the business of the company during the financial year; and

(b) the position of the company at the end of that year,

consistent with the size and complexity of the business

2. The review must include –

(a) a statement of the business, objectives and strategies of the company;

(b) a description of the resources available to the company;

(c) a description of the principal risks and uncertainties facing the company; and

(d) a description of the capital structure, treasury policies and objectives and the liquidity of the company.

1. The directors’ report for a financial year must contain

(a) a fair review of the business of the company, and

(b) a description of the principal risks and uncertainties facing the company.

3. (2) If the review does not contain information and analysis of each kind mentioned in paragraphs 4 and 5, it must state which of those kinds of information and analysis it does not contain.

4. (1) [To the extent necessary to comply with the general requirements of paragraphs 1 and 2,] the review must include -

(a) information about environmental matters (including the impact of the business of the company on the environment),

(b) information about the company’s employees, and

(c) information about social and community issues.

(2) The review must, in particular, include - 

(a) information about the policies of the company in each area mentioned in sub-paragraph (1), and

(b) information about the extent to which those policies have been successfully implemented.

5. [To the extent necessary to comply with the general requirements of paragraphs 1 and 2,] the review must also include -

(a) information about persons with whom the company has contractual or other arrangements which are essential to the business of the company; and

(b) information about receipts from, and returns to, members of the company in respect of shares held by them.

6. (1) [To the extent necessary to comply with the general requirements of paragraphs 1 and 2, the review must] include analysis using financial and, where appropriate, other key performance indicators, including information relating to environmental matters and employee matters.

(2) In sub-paragraph (1), “key performance indicators” means factors by reference to which the development, performance or position of the business of the company can be measured effectively

3. The review must, to the extent necessary for an understanding of the development, performance or position of the business of the company, include –

(a) analysis using financial key performance indicators, and

(b) where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters

5. In this section, “key performance indicators” means factors by reference to which the development, performance or position of the business of the company can be measured effectively

8. The review must-

(a) state whether it has been prepared in accordance with relevant reporting standards and

(b) contain particulars of, and reasons for, any departure from such standards.

Section 235 (3A). If the company is a quoted company, the auditors must state in their report –

(a) whether in their opinion the information given in the operating and financial review for the financial year for which the accounts are prepared is consistent with those accounts; and

(b) whether any matters have come to their attention, in the performance of their functions as auditors of the company, which in their opinion are inconsistent with the information given in the operating and financial review.

Section 235 (3). The auditors must state in their report whether in their opinion the information given in the directors’ report for the financial year for which the accounts are prepared is consistent with those accounts