ACCOUNTING: Easily Accessible Info Key to Successful Corporate Reporting
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Therefore, reputable listed companies devote a lot of time, resources and innovation into making information more accessible.
With this in mind, companies will be looking at this year’s Ernst and Young Excellence in Corporate Reporting Survey results, being released on Tuesday, September 13, to see how their reporting stacks up against their peers.
In today’s world full compliance with accounting standards and regulatory requirements is taken as a given and this means Ernst and Young Excellence in Corporate Reporting Survey’s mark plan increasingly emphasises the information that takes the reader beyond simple compliance.
Garth Coppin, National Director of Accounting at Ernst and Young, says the higher level of disclosure is essential as business has become more complex and accounting standards have been forced to evolve.
“Companies need to disclose more information so readers can understand the complexity of doing business. Some companies fail to make an effort to help their stakeholders really understand the information and they lose marks in both the survey and with their shareholders.
“This increases the danger of information overload and people may have difficulty isolating the information they need; the data that goes to the heart of the company’s present and likely future performance,” Coppin says.
He says annual reports are not novels. Very few people read an entire annual report and most readers focus on the first few pages and then pick out the additional information they want from the report as a whole.
Therefore, many winning annual reports have succinct overviews from senior corporate officers that set out the information that management believes investors and analysts most need to properly understand and evaluate the company.
These summaries are usually cross-referenced to sections of the annual reports where issues are dealt with in more detail.
“Unfortunately, less effective enterprises dump their information in their reports and leave it to their readers to sift through the mountains of data,” Coppin says.
Companies Need Bad and Good in Their Corporate Reporting
As annual reports get bigger so different people contribute different sections of the reports; resulting in differing writing styles, duplication, and even unbalanced reporting that focuses on information that puts the company in a favourable light.
However, investors usually read their annual reports with a degree of foreknowledge and they expect to see companies fully report on negative events.
“They want explanations as to what went wrong and why, the strategy for correcting the situation, and the benchmarks by which management and shareholders can measure progress.
“When investors see companies have reported honestly and appropriately dealt with the risks, they will be a lot more forgiving than with enterprises that seek to conceal or gloss over events,” Coppin says.
He says the good annual reports are written concisely, in clear and easily understood language, so as to better communicate with the company’s stakeholders. In addition, they make good use of presentation and graphics to convey information more effectively.
Keeping Corporate Reporting Simple is Key
Another key trend is to try not to overload the annual report and companies wishing to provide supplementary information, such as that on sustainability and governance, often do so via their corporate websites.
Linked to this approach is an important change in the new Companies Act, namely those organisations can now send out summarised financial statements.
“Investors can still request the full hardcopy document or simply access the full report via the company’s website. Not only is the move environmentally responsible but it is helping to reduce the huge cost of reporting and not overloading investors with information they do not want,” Coppin says.
However, Coppin warns companies not to cut corners when publishing on the web and to reformat their corporate reporting properly for landscape format web publishing.
Business News Sector Tags: Finance| Business|