Audit – consortium urges reporting reforms

A consortium that includes the leading audit firms and the CBI is calling for reforms to what companies disclose in their reports, in a bid to give a better reflection of company value and performance.

The Enhanced Business Reporting Consortium, which was formed through an initiative by the American Institute of Certified Public Accountants, is driving a programme to simplify reports and have non-financial items that effect business performance revealed. ‘So much of the information they are now having to disclose is not meaningful or helping investors,’ said Mike Starr, chairman of the AICPA committee on enhanced business reporting.

According to Starr, historical cost-based financial reporting is not the most efficient way of reflecting a company’s true value.

‘Non-financial items like business opportunities, management strategies and risks have a big effect on company performance and need to be reflected in company reports,’ Starr said.

By pulling together stakeholders from business, the accounting profession and investor groups, the consortium is aiming to standardise what information companies should be disclosing in addition to traditional financial figures. These disclosures will be made on a voluntary basis, with the possibility that regulators might pick up on the new methods at a later date.

‘We want to remove redundant information from reports and give investors information that is valuable.’ Starr said.

Tony Cope, a board member of the IASB, said the organisation had met with the consortium to discuss the concept of enhanced reporting standards, but was still deciding on whether enhanced reporting would provide better information to investors.

‘The IASB is looking into whether primary financial statements and notes to financial statements are enough to give a fair reflection of a company, but the concept of enhanced reporting has not been accepted yet,’ Cope said.

The IASB has established research groups to examine the form and content of reports, the quality of OFR papers and principles of disclosure.

‘Only once the findings from these research projects are announced will the IASB be able to give an opinion on enhanced reporting,’ Cope said.

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