Corporate reporting


Corporate reporting is an ongoing challenge for boards of directors. Although they do not prepare the organization's disclosures, they must approve and take ultimate responsibility for them.

Those disclosures have grown in volume and complexity in recent years: they must meet the sometimes conflicting or duplicative requirements set out by accounting standards bodies and securities regulators, reflect different reporting standards in different jurisdictions, and do it all while telling the story of the business in a way that is understandable and useful for shareholders and other stakeholders.

If stakeholders can't find relevant, understandable and timely information in an organization's disclosures, it may be because the information they want wasn't included; many stakeholders, for example, feel organizations provide inadequate non-financial information. When the information they want is provided, it may not be connected; organizations report financial, non-financial, governance, operational and strategic matters, but typically do so in stand-alone documents that are not well integrated or linked.

Various initiatives have tried to address some of these problems. Continuous auditing and continuous reporting, for example, would enable stakeholders to receive financial and non-financial information almost in real time, rather than after the quarter end, allowing them to take advantage of important moves and events as they happen. On the other hand, a continuous stream of information, at least some of which would likely be immaterial, would only exacerbate the current information overload. Continuous auditing and reporting hasn't been widely adopted by organizations, likely because of its cost, minimal demand for it by stakeholders, and a fear that continuous disclosure may put the organization at a competitive disadvantage. 

Regulators such as the U.S. Securities and Exchange Commission (SEC), the UK's HM Revenues & Customs, and Singapore's Companies House, among others, require publicly-listed companies to use XBRL (eXtensible Business Reporting Language). The SEC phased-in its requirements for XBRL based on company size, including phasing-in the amount of information to be provided in XBRL format in the initial and subsequent reporting years. While organizations have met these regulatory requirements, whether or not XBRL will significantly benefit shareholders is yet to be seen. XBRL does allow stakeholders to search an entity's disclosures for the information they need, but their ability to compare the disclosures of different organizations may be limited if organizations don't tag and categorize their disclosures in the same way.

A major cause of the "noise" in most organization's reporting is the inclusion of immaterial information. "More" has definitely not resulted in "better." While the primary purpose of corporate disclosures is to attract investors, that objective seems to have become secondary to one of avoiding litigation or regulatory scrutiny. Disclosures are increasingly being directed by legal counsel, who advises disclosing everything with a minimum of detail.

Given this environment, it is not surprising that shareholders and regulators are concerned about the amount of boilerplate content and lack of transparency in many organizations' disclosures. Regulatory bodies, such as the IASB, the U.S. FASB and SEC and the UK FRC are all looking at ways to reduce excessive disclosures and improve the quality of information. While some proposals and exposure drafts have been issued, such as the FASB's Proposed Statement of Financial Accounting Concepts, many of these initiatives are longer-term efforts.

In May 2014, the Center for Audit Quality (CAQ) and the Institute for Corporate Reporting (ICR) at the George Washington University School of Business launched an initiative on Rethinking Financial Disclosure. In November 2014, the initiative presented its report to the SEC. It contains 11 recommendations for improving the effectiveness of disclosures, including:

  • providing executive summaries that highlight only the changes made compared to the previous year's submission
  • stratifying risk factors according to non-company-specific and company-specific issues
  • requiring a "Strategic Report" that illuminates the company's objectives and strategies, and
  • creating a "Muse Project" to solicit crowd sourcing ideas on better ways to disclose information, particularly as related to reporting on risks.


If an organization is to disclose information that is useful to its stakeholders, it must first understand what each of its stakeholder groups' values, and the value the organization either gains or losses from the way it is perceived. Transparent, useful disclosures can do more than just attract investors; they can also help win the support of other stakeholders, including employees, customers, and others, by demonstrating the organization's commitment to and performance in areas of importance to them.


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