The Code remains flexible, enabling reporting specific to each company. Credit: LALAKA/Shutterstock.

The Financial Reporting Council (FRC) has released its Annual Review of Corporate Governance Reporting 2024, focusing on the UK Corporate Governance Code.  

The 2018 Code remains effective for annual reports in 2025, with a transition to the new Code starting from 1 January 2025.  

The review underscores the importance of the Code’s ‘comply or explain’ approach. 

This approach allows companies to deviate from provisions when necessary, provided they offer high-quality explanations for their alternative methods.  

It remains flexible, supporting reporting that is specific to each company.  

FRC Regulatory Standards executive director Mark Babington said: “The flexibility of the Code remains fundamental, and we are pleased to see companies using this appropriately. As we approach this significant transition period, the FRC is committed to supporting companies with various tools and resources to enable effective implementation of the new Code.” 

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While companies use this flexibility, the FRC notes that the quality of explanations can improve.  

The FRC encourages investors, proxy advisors and service providers to support companies that provide strong explanations demonstrating good governance. 

The new Code continues its principles-based approach, emphasising outcomes-focused reporting and enhanced risk management.  

A change noted is the introduction of Provision 29, effective in 2026, requiring strengthened reporting on risk management and internal controls from 2027. 

However, the review indicates that attention is still needed in these areas.  

An analysis of 130 companies revealed that 25 failed to report, or report clearly, on the effectiveness of their internal controls.  

The FRC designated the Chartered Institute of Public Finance and Accountancy’s Diploma in Local Audit as a pre-approved local audit specialist training earlier this month.