Industry group calls for changes to corporate reporting
Corporate reporting is at a crossroad and needs to move in a new direction if it’s to command a central role with investors, according to a newly-formed industry group.
The Report Leadership Group said corporate reporting needed to be more relevant, informative and accessible. The group believes corporate reporting should provide investors with what they want without giving them unnecessary detail.
“As investors model the future they typically have insufficient forward-looking contextual and non-financial information to underpin their cash flow projections,” said Report Leadership spokesman and PricewaterhouseCoopers corporate reporting and communications partner Nick Ridehalgh.
Ridehalgh said unlike traditional reporting, which focuses on past financial performance, what’s needed is more information on a company’s expectations of future performance and what will drive it.
“In essence, the narrative report should be the top slice of management information that is routinely being used in board discussions,” he said.
The group demonstrated how proposed changes to corporate reporting could be applied with extracts from the annual reports of a fictitious company, Generico.
“We are encouraging companies to take a step back from their reports and think about what they need to communicate and what investors want to know. The illustrative report demonstrates a new and clearer report focused on information valued by investors and capital markets,” said CIMA Global president John Coghlan.
Report Leadership is a multi-stakeholder group that aims to challenge established thinking in corporate reporting. It is comprised of the Chartered Institute of Management Accountants (CIMA), PricewaterhouseCoopers, communications consultancy Radley Yeldar and Tomkins plc.
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