Reporting juggernaut goes into reverse
‘Corporate reports’ and ‘exciting developments’ are not always phrases which naturally fit together – but it looks like times are finally changing.
For years now, we have been expected to plough through 150+ page annual financial reports, with the risk both to postmen’s backs and of readers nodding off by the time they get to page 40. So much material, and yet of limited real use to readers and with no company-specific focus
The annual financial report has been almost the last bastion of conservatism and tradition – essentially unchanging (other than growing in size) while all around, businesses have revamped and sometimes revolutionised the way they operate and communicate, particularly in the digital era.
Companies have mainly taken a protective stance – if in doubt, disclose – better to be safe than sorry, and if it means the report contains boilerplate disclosures and the real messages are lost in the detail then so be it.
One could argue that this approach has resulted from regulatory pressures rather than being driven by providing investors with focused information. Thankfully, there have recently been winds of change as standard-setter and regulators in Australia and overseas have been encouraging companies to review accounts disclosures, take out immaterial content and make sure they are useful to readers.
So it’s really pleasing that the message seems to be getting through. Our new study on the ASX 200 companies shows that fully half in the most recent reporting season produced financial reports which were shorter than in the previous year. More than a third have reduced the number of notes to the accounts while others have clarified and re-ordered those notes to focus attention on the key items of disclosure. In other words, to add value and better inform the reader rather than sticking with the status quo.
Given that many believed the increase in disclosure requirements from regulation and accounting standards over the past 10 years was an unstoppable process, this is genuinely good news. There’s a long way still to go – but the green shoots are there!
The new ASX 200 report is available for download on the KPMG website.