Narrative reporting regulation threatens its usefulness, study finds

The usefulness of narrative reporting for shareholders is being threatened by
the increasing complexity of rules and standards surrounding it, according to a
new survey.

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The joint ACCA and Deloitte study of 230 chief financial officers in listed
companies found that they were struggling to meet the dual requirements of
shareholders and regulators.

“Companies are trying to serve two masters at the same time,” said Deloitte
audit partner Isobel Sharp. “They want to inform shareholders of what is
happening in the business. They need to satisfy regulators by meeting all the
disclosure rules. To achieve succinctly and simultaneously both outcomes in the
same report is a major challenge.”

The report found that 65% of those interviewed wanted a narrative reporting
environment with more discretion and less regulation, 58% would like to see the
inclusion of an external audit opinion and 51% would like to see guidance issued
by the IASB.

“[Shareholders] want to know about the state of the business,’ said Ron
Dissinger, chief financial officer, Kellogg Company. ‘They can read and
interpret our financial statements. What they want set out in the narrative are
clear statements on the state of the business and drivers of performance.”

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