The global financial system is slowly undergoing a series of reforms, but one crucial element of reconstruction is being largely ignored. The corporate reporting model in its current form does not meet the needs of investors. It is also becoming increasingly difficult for it to fit the requirements of preparers, auditors, regulators and standard-setters.
In early 2013, we tested the premise that fundamental reforms were needed by interviewing ten international leaders in the field, including Hans Hoogervorst, chairman of the International Accounting Standards Board, and Mervyn King, chairman of the International Integrated Reporting Council. All agreed on the need for change but they did not concur on how far-reaching the reforms had to be or what should be altered.
But why change a reporting system that has evolved over decades? After all, the International Financial Reporting Standards that drive the basis for companies' reports and accounts have now been adopted in 100 countries. They have enhanced the comparability of companies’ performance and improved the efficiency of capital markets. And there is general agreement that corporate reports provide a reasonable estimation of the financial condition of a company at a specific point in time. But is this enough? I say that it isn't.
I believe corporate reporting is broken and we need a concerted effort to fix it. It is time to begin a wide-ranging debate about what is wrong with the current corporate reporting model and how to change it.
Here’s your chance to add your views to those of the ten individuals you will find in KPMG’s The future of corporate reporting: towards a common vision.
Thanks for the comments posted so far. We too want it to be easier for users to get, interpret and use information; but how: xbrl, better narrative reporting, independent assurance? We want to explore what to change about Corporate Reporting. We also agree there's a need to reconcile different groups. Keep posting your thoughts and ideas, in particular the trailblazers, and we'll explore the topics you raise in future articles.
David Littleford, Partner - KPMG in the UK
4. Well and truly broken.
3. Though trailblazers exist, the bottom line is that we still have a long way to go and it’s collaboration that will smooth the path ahead.
Nicole Lawler, Global Director for Climate Change and Sustainability, Total eco Management Limited
2. The challenge - probably unsolvable - is what to change to? There are too many interested, or self interested groups, to allow a common accepted set of standards
1. Corporate reporting is only as old as the users of reports make it. A major problem is occurring because the users have inadequate resource to use the very considerable amount of information that is provided by their invested companies. Readers must invest in more resource.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.