Due to many recent changes within the business landscape as a result of diversification and technological advancements, it has been argued that the current financial reports are failing to provide users with relevant information.
To address these concerns the Federation of European Accountants (“FEE”) has issued a discussion paper “The Future of Corporate Reporting – creating the dynamics of change” in October 2015. This paper has proposed the following changes in a effort to address the shortcomings of the current financial reports prepared:
- A single, easy-to-understand report;
- A CORE report or executive summary. This summary would include key information necessary for understanding the company’s affairs including key financial results. The inclusion of this information would be based on relevance for the company’s stakeholders as well as materiality;
- Additional report(s) which supplement the core report. These reports can be hyperlinked to the CORE report as well as a series of additional reports such as disclosures for the financial statements. These additional reports would allow stakeholders to determine the information they require;
- Preparation of the CORE report in a timely manner with additional reports being prepared and made available at a later date;
- Ensuring that the CORE and additional reports are available via a dedicated area on the company’s website; and
- Provision of commentary via several mediums such as text, audio, video and graphics with a high level of interactivity.
New reporting structure
The CORE report would include:
- Company’s mission and vision;
- Business model and strategy;
- Main corporate objectives, including key business and financial transactions;
- Main risks and risk mitigation activities;
- Key aspects of corporate governance, including internal controls;
- Key financial statements or extracts thereof, key performance indicators and analysis of financial and non-financial information;
- Forecasts and key future plans; and
- Auditor’s report.
The additional reports would include information required by regulators or other stakeholders as well as information that the company believes as value, such as:
- Human rights;
- Intellectual property;
- Corporate governance;
- Risk management reporting and internal controls;
- Country-by-country reporting; and
- Detailed financial statements disclosures.
Through the proposed CORE and additional reports, I believe that the FEE has made a signifiant step to put in a place a structure to ensure that the changing needs of company stakeholders are addressed.