Partner Article

Does the corporate reporting model need to change?

The future of corporate reporting is at a critical point, particularly the ability to evolve and meet business and society’s changing needs.

These are the conclusions of a new report from the Chartered Institute of Management Accountants (CIMA), PwC and think tank Tomorrow’s Company.

Financial capital is at risk of being misallocation, poor business decisions will be made, and society will struggle to respond logically and responsibly to the demands of a world with 9 billion people, unless reporting changes, the study warns.

Tomorrow’s Corporate Reporting: A Critical System at Risk, highlights the risks associated with an old reporting framework.

Tony Manwaring, CEO of Tomorrow’s Company, said: “We have come to terms with the short-term thinking and silo decision-making which did so much to cause the financial crisis.

“Corporate reporting must also come to terms with these challenges, to make the step-change needed so that it is fit for purpose during the global recovery and beyond.

“To be effective, reporting must not only provide an integrated account of what is material, drawing on financial and non-financial data - tomorrow’s corporate reporting must fully reflect the needs of the whole system of which it is part, and all the key players and institutions who bring the system to life.”

The study looks at the whole reporting system, including people, organisations, rules and processes, and identifies key barriers within it.

Such barriers include: stakeholders tending to see pieces of a jigsaw, rather than the whole system; focus on data, rather than people culture and behaviours; extra focus on quantity, not quality, as new requirements are bolted onto the model; and complexity.

David Phillips, senior corporate reporting partner, PwC said, “Today there is insufficient agreement around the role of corporate reporting and its direction of travel and it appears due to historic institutional structures and the behaviours of those involved in the system, that the system is itself a barrier to change.

“It is clear that corporate reporting objectives differ around the world and are in a constant state of flux.

“And because of the way reporting has evolved, it is rare for any one regulator to have oversight of the whole reporting system in a particular territory.

“People tend to see particular pieces of the reporting jigsaw, but rarely see it as a ‘system’ at all.”
The research sets out a framework for consensus building and change, developed around a set of questions.

These include: what is the objective of corporate reporting and is global convergence a worthwhile goal? Does anyone have oversight of the entire system? Is the current reporting system itself a barrier to change?

A discussion paper from the International Integrated Reporting Committee on integrated reporting will present the case for a new model.

It is expected to engage the G-20 on the need for reform to the current reporting system, as for any new model to emerge, a global debate needs to address the need for action.

This was posted in Bdaily's Members' News section by Tom Keighley .