CIMA boss slams balance sheet stats

Companies are putting up to 80% of their assets off balance sheet, according
chief executive Charles Tilley.

‘Not too many years ago, 80% of a company’s market value was reflected on the
balance sheet. Today, that ratio is roughly reversed with only about 20% on the
balance sheet, Tilley said.

‘The sheer volume of data has not made the information accessible. If
anything it hinders access,’ he added.

Speaking at CIMA’s annual conference, Tilley also criticised the complexity
of financial reports, and called for sweeping changes. ‘We are at a crossroads
in corporate reporting,’ he said.

He criticised the growing complexity of financial statements, which he said
were becoming increasingly more theoretical: ‘Fair value causes considerably
more volatility and it is becoming more difficult to understand the underlying
performance of a company,’ Tilley said. Tilley’s comments will fuel growing
fears about the length of corporate reports and a belief that they do not work
for the users of financial statements.

He emphasised a need to focus on the short-term strategic priorities in
company reports as well as the long-term outlook: ‘Reports were all about
creating value in the past, but the existing financial model does not provide
that,’ Tilley said.

The CIMA chief said that investors were demanding more disclosures on
cashflow. He relayed analysts’ views, which said that investors were clearly
interested in cashflow, but were not happy with cashflow disclosures.

Janice Lingwood, a director of PricewaterhouseCoopers corporate reporting
team backed up Tilley’s criticisms: ‘Important information can be buried very
deep in reports.’

PwC’s communications with analysts and investors showed that stakeholders
were ‘struggling’ to find value in the statements.

Tilley added: ‘The reports need to evolve more fully to satisfy the needs of
the user. The volume of reports and their usefulness clearly needs looking at.’

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