INVESTORS and listed companies have been urged to participate in a project on the effective communication and disclosure of dividend policy and capacity launched by the FRC earlier this week.
Launched under the accounting watchdog’s Financial Reporting Lab, the project aims to help companies understand investor concerns and improve reporting in this area.
According to the Lab, the project will explore how companies disclose any significant constraints on dividends, such as structural, legal 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.
“Such disclosures are also seen as highly relevant in the light of current developments in the strategic report and the reporting of solvency and liquidity risks,” the lab said.
“Investors are also seeking more clarity and transparency in this area, given the increased use of fair values in accounting which can increase the complexity of assessing which profits are distributable.”
Full details of the project can be found here.