The Financial Times - Business leaders eye joined-up reporting
Overview
The Financial Times - Business leaders eye joined-up reporting
Posted: 19 August 2010
The Financial Times discusses the International Integrated Reporting Committee and covers the recent institutional investor research conducted by SAS with Thomson Reuters.
Highlights:
Prince Charles has scored an unusual success. Six months ago he
urged an influential group of business leaders, accountants and
regulators to develop an internationally consistent approach to
reporting on corporate sustainability. This week they launched an
initiative to do just that.
The International Integrated Reporting Committee - which is
supported by the 100 club of the UK's top finance directors, top
accountants and the Prince's own not-for-profit group Accounting
for Sustainability - will look at "joining up" the four silos of
the annual report - financial statements, management commentary,
information on governance and corporate social
responsibility.
Ian Powell, UK chairman of PwC, said it was "an important step on
the journey to create a new corporate reporting model fit for the
21st century".
Experts say the initiative is the most striking example of a trend
that has been building since the financial crisis: a demand from
investors for more non-financial information to supplement audited
financial accounts, and annual reports that are more
informative.
The International Accounting Standards Board, for example, is
considering drawing up rules to govern management commentary.
In a recent survey from SAS, a consultancy, and Thomson Reuters
just 12 per cent of investors interviewed considered annual reports
to be both insightful and objective. Barely a quarter felt annual
reports clearly articulated the strategy of the business.
Almost all respondents wanted greater segmental and divisional
information, more disclosure of hedging and derivative exposure and
better understanding overall of potential risks.
The crisis has raised concerns about the limits of financial
reporting in highlighting the risks inherent in banks'
businesses.
At an accounting forum last month, a senior investor suggested
shareholders may have been more aware of risks inherent in BP's
business model had it had to produce audited narrative reporting
and a more integrated approach to financial reporting.
But a desire for audited non-financial information throws up its
own challenges. More information is also only considered useful
when it is succinct and relevant. If not, it can cloud the
underlying picture of a company's financial health, experts
say.