What you need to know about the Section 172 Statement

What needs to be included in a Section 172 Statement?

Investors need information on both stakeholders and decisions to understand how a company is progressing towards its purpose and long-term success. A Section 172 Statement should therefore include information on both areas.

Information on Stakeholders

There are four areas of information relevant to stakeholders which are important to the investors:

1. It is useful for investors to understand who the stakeholders relevant to the company are, and how they influence the operation of the company. Questions to consider are:
   • Who are the company’s key stakeholders?
   • Why are these stakeholders important?
   • What is important to the company’s key stakeholders?
2. Investors also need to understand how the company builds and maintains relationships with its stakeholders and understands their interests, needs and concerns to pursue long-term success. Useful things to consider are:
   • How the company engages with its key stakeholders?
   • What feedback mechanisms are used and what feedback has been received from stakeholders?
3. What affects the company’s relationships with its stakeholders and how this could impact on the success of the company is important. This includes risks that could affect the stakeholders.
4. Finally, investors should understand what the metrics used by management to monitor and assess relationships with stakeholders are, and the strength of those relationships.

Information on Decisions

To help investors understand what the company’s principal decisions were and how they contributed to success, they should consider:

1. What were the decisions of strategic significance during the year?
2. How and why did the board reach the decision?
3. How were stakeholders considered in reaching the decision?
4. What were the difficulties in making the decision?
5. What are the expected and actual outcomes of the decision?

What makes a good Section 172 Statement?

Investors find Section 172 Statements that bridge the information above, and consider how the company is progressing towards long-term success most useful. To help achieve this:

1. Consider all aspects of Section 172 and not only stakeholder engagement;
2. Ensure the report discusses principal decisions and how stakeholders were considered in making the decisions;
3. The report should bridge information on stakeholders and decisions using a two-way approach, and include both in the statement;
4. The report should contain sufficient detail to act as a standalone source of information; and

How the information links to the business model and strategy should be include which also demonstrates how the company is progressing towards long-term success.

How Mercia can help?

If you would like to learn more about Section 172 Statements, or any other accountancy or audit related issues book a place on our update course.

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