Quarterly reporting not option for UK, say experts
Pressure on US companies to have their quarterly reports audited is unlikely to force UK regulators along a similar road, experts have claimed.
Link: MEPs reject quarterly reporting
The news came after an annual poll across the Atlantic revealed that most shareholders were in favour of forcing companies to have their financial statements certified by external auditors quarterly, rather than annually.
US investors overwhelmingly favoured quarterly reports as a solution to problems brought to light by recent corporate scandals. But experts said that support for audited quarterly reports was unlikely to extend to the UK, given the intense opposition.
In fact, the view in Europe is that quarterly reporting encourages short-termism and increases pressure on companies to manipulate their earnings figures to match investors’ expectations. The European Commission decided that public companies will issue a trading statement twice a year, but plans are yet to be finalised.
Nigel Sleigh-Johnson, head of financial reporting at the ICAEW, said: ‘I would expect there to be very limited support for audited quarterly reporting in view of the arguments put forward against it here.’ He added that it would have a ‘major impact’ on companies’ costs.
Nick Winters, who sits on the accounting standards committee at the Quoted Companies Alliance, agreed.
‘The problem with quarterly reporting is that it’s very short-term and costly, particularly for smaller companies,’ he said.
Winters, a partner at MRI Moores Rowland, said it would also lead to ‘information overkill’.
From an auditor’s perspective, Martyn Jones, technical partner at Deloitte, said: ‘It would require a lot of work, almost constant reporting.’
Jones also pointed out that initiatives by regulators to increase the speed of filing reports would be undermined if auditors were forced to produce quarterly reports.