Investor data to be clarified
Finance directors are set to benefit from new guidance that will sweep away years of informal practice for listed companies that make price-sensitive capital market announcements.
The new guidelines will form part of the battle to help directors prevent or correct unrealistic market expectations, reducing the pressure to aggressively manage earnings.
Produced by the ICAEW, the proposals cover how directors report prospective financial information to investors, such as profit warnings and future funding requirements.
At a time when stock market announcements are coming under increasingly close scrutiny, the proposals will be seen as an attempt to shore up investor confidence by providing clear and prompt company information.
The help comes at a time when Sir Howard Davies, chairman of the Financial Services Authority, is overseeing a review of listing rules which will also look at the disclosure of price-sensitive and forward-looking information.
Currently announcements such as profit warnings rely on an ‘unspoken tradition’ that has led to concerns over a lack of clarity.
‘If you are a finance director who wants to get across the importance of ensuring communications are carried out in a responsible and thorough way, this gives you external guidance,’ said Robert Hodgkinson, chairman of the ICAEWås steering group on prospective financial information.
The guidance will provide a set of benchmarks that will help not only directors but also investors, analysts and other commentators to assess the quality of the financial information.
According to the ICAEW, the framework could also be applied to any forward-looking information, such as the operating and financial review proposed in the company law white paper.