Financial Reporting Council
Thematic review · October 2025
Annual report extracts alongside the Financial Reporting Council’s assessment.
Independent report of FRC findings
Six anonymised findings on share-based compensation disclosures, from settlement and tax to adjusted profit.
Scope: Settlement classification
Two companies said their awards were all equity-settled, yet their cash flow statements included unexplained cash outflows that indicated some cash settlement.
Company not named by the FRC FRC review
Scope: Tax allocation
Three companies showed an IFRS 2 expense adjustment in the tax charge reconciliation, with no corresponding tax deduction recognised in equity.
The FRC flagged that this could indicate that some excess tax benefit had been included in profit incorrectly. Its concern was a possibility raised by the disclosure.
Company not named by the FRC FRC review
Scope: Repeated information
The FRC found information repeated in places such as the remuneration report, the share-based payment note, related party disclosures and the staff costs note.
The FRC identified repetition as a weakness. It highlighted focusing on material schemes and cross-referencing related disclosures where appropriate.
Company not named by the FRC FRC review
Scope: Boilerplate policy
The FRC cited annual reports that included a cash-settled accounting policy despite having only equity-settled awards.
The FRC identified irrelevant or non-specific policies as a source of unnecessary detail.
Company not named by the FRC FRC review
Scope: Acquisition disclosure
One company settled the acquiree’s options after completion. Its disclosure left open whether settlement was voluntary or required by the acquisition terms.
The FRC said it is helpful to explain whether material awards were replaced and the accounting treatment that followed.
Company not named by the FRC FRC review
Scope: Alternative performance measures
Some companies excluded IFRS 2 charges from alternative performance measures without a clear explanation, even though the charges appeared to be an established part of employee remuneration.
The FRC expects a clear, useful explanation when a company excludes the charge from an alternative performance measure.
Company not named by the FRC FRC review
FRC assessment
The FRC said it may challenge the classification judgement in these circumstances. It identified an apparent inconsistency to explain.