The FRC’s Financial Reporting Lab published key attributes and approaches to reporting business models that investors want to see in companies’ reports.
Key findings from the Lab’s recent report ‘Business model reporting’ are summarised into one page, including the importance of the business model; key attributes investors want to see in company reports; full and transparent disclosure if there are more than one business model in an organisation; and how disclosures should be presented.
Although the term ‘business model’ did not come into use in relation to corporate reporting until around the late 1990’s (driven by the new technology company business models), companies in the UK have been disclosing aspects of their business model for a long time. Since 2013, the UK Strategic Report Regulations require the disclosure of business models by quoted companies.
This project was first proposed by companies who wanted to understand information on business models that is useful to investors and how that information is being used. This initial interest was given further support by the responses to the Lab’s online stakeholder survey conducted in summer 2014. The survey highlighted that for all Lab stakeholders (companies, investors and advisors), business model reporting, principal risk reporting and viability reporting are seen as challenging areas and therefore high on their agenda for Lab projects.
Consequently, a series of projects was announced by the Lab in summer 2015 to cover business model, principal risk, and viability reporting. This Business model reporting project was initiated as the first in the series because establishing views on good business model reporting is considered to provide a foundation on which risk and viability reporting can then be developed. This sequential approach also allows market practice to develop in relation to new requirements on risk and viability reporting.
Investors use business model disclosure to:
• develop their valuation model and investment case;
• compare business models between companies and form views on sustainability;
• confirm the company is applying the business model they think are;
• identify changes to the business model; and
• refer to before meeting companies.
Full press release
Report summary
Full report
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