Sharp highlights info shortfall in IMS reports

Most UK companies have adapted well to the filing of interim management
statements – but surprisingly, few have been able to give the market an
indication of their financial position on the back of the credit crunch,
Deloitte has said.

The observation, made by Isobel Sharp the firm’s technical partner, follows
an assessment of how UK listed companies have implemented the requirements for a
twice-yearly interim management statements in the first year of operation.

‘It concerns us because this survey takes place over a year, and it started
in March to April last year, Sharp said. The credit crunch didn’t hit until
August, so it wasn’t then on top of everyone’s agenda.

‘But what’s been surprising for us was that there wasn’t a better description
of the financial position of the company, given the interesting economic times –
and we did look for it.

‘It’s difficult to know why this is – perhaps it has to do with the fact that
the second IMS comes out between the half and full year reports, which means
there is a lot of reporting going on, and companies might not be really settled
into the reporting routine yet.’

The new requirement came from the EU’s Transparency Obligations Directive
which was implemented in the UK via the UK Listing Authority’s Disclosure and
Transparency Rules and became effective for periods beginning on or after 20
January 2007.

Of the 200 corporates sampled by Deloitte, 4% failed to issue an IMS. 9% were
late by a few days while one was delayed by a month.

But 87% of companies produced their reports on time. However Deloitte found
that only a few companies ticked all the boxes in terms of detail.

‘A lot of companies talk about material event, for example, but then didn’t
explain financial impact of that event. We couldn’t quite give them a tick.

‘A material event might have been a transaction or an event that took place
two weeks earlier. We’re warning companies to not repeat the action of waiting
for an IMS to communicate this to the market. Such events must be communicated
to the market in a statement immediately,’ Sharp added.

Deloitte drew attention to one company fined £350,000 for not communicating
such information to the market, which can be construed as inside information.

The report also found that some companies are still deciding on how to use
their IMS, and 17 actually published a combined IMS and AGM statement while
another eight published statements at the same time as the AGM.

Sharpe said that there were no major signs that the IMS is seen as an
excessive and unnecessary burden.

‘This may be because the IMS replaced the threat of UK companies being
forced to issue detailed quarterly financial reports. While many
companies voluntarily reported more often, the IMS has formalised more
frequent communication by all,’ Sharp added.

Further reading:

interim documents lack information

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