Corporate reporting has become increasingly complex in recent years as stakeholders ask for more and more diverse and detailed information from organisations, and technology allows even greater access to data. A discipline that was once limited to financial reporting now encompasses sustainability, governance, risk management, tax and elements of corporate law – and it is constantly evolving.
A new report from ACCA, Principles of good corporate reporting, describes corporate reporting today as ‘akin to a kaleidoscope’: information is viewed from different angles by different stakeholder groups, helping them form an understanding that influences their decision making.
Readers need to spend a lot of time and effort looking for the information they need
Over the past decade, corporate reporting has been transformed by legislation, pressure from stakeholders, and technology. Users and preparers have access to more information, which has contributed to greater accuracy, but has also resulted in information overload; and greater use of social media has led to more timely dissemination of information, but also a rapid rise in disinformation.
Connected and cohesive
ACCA’s report, which was developed from insights from multi-stakeholder groups and corporate reporting professionals, auditors and analysts, concludes that the qualities relating to corporate reporting set out in existing reporting frameworks remain relevant. But, it adds, the quality of reporting can be influenced by the way in which these characteristics and qualities are embedded in today’s ways of working.
‘Organisations,’ it says, ‘need to bring together different pieces of information to tell a connected and cohesive story’. (See also ACCA’s report Making information connections for sustainable value creation.)
The report lays out the ACCA’s eight principles of good corporate reporting. These are grouped into four closely connected themes: connectivity and coherence (described as key to achieving decision-useful corporate reporting); standards and frameworks; data and information; and communication.
The report explores each of these principles in turn, from the perspective of policymakers (including standard setters and regulators) and organisations as corporate preparers. It explains the significance of each principle and the specific considerations for each group.
Collaboration will be needed to use the same terminology so that terms have a consistent meaning
In terms of embedding connectivity and coherence, for example, the report explains that connectivity is seen as vital as the volume of information, and the demand for more of it, grows. ACCA research has shown, for example, that when it comes to climate-related disclosures, information overload is partly attributed to the scattering and duplication of disclosures with little or no cross-referencing, meaning that readers need to spend a lot of time and effort looking for the information they need.
‘Coherent and consistent information enables users of general-purpose corporate reports to understand the connections between various types of information, and how these connect to different aspects of business activity,’ says the report.
Overarching framework
Global policymakers and standard setters play an essential role in setting the tone for an overarching emphasis on connectivity and coherence. This is why ACCA, says the report, ‘believes that it is important to develop an overarching conceptual framework for corporate reporting that incorporates and builds on the principles of the Integrated Reporting Framework.’
When discussing the principle of maximising comparability, the report notes that ACCA has welcomed international efforts, headed by the IFRS Foundation, to develop interoperable standards and frameworks. But it adds that further collaboration will be needed to align common disclosures and use the same wording and terminology across global, regional and jurisdictional reporting requirements so that terms such as ‘sustainability’ and ‘materiality’ have a consistent and common meaning. The ultimate goal is that reporting organisations will eventually need to prepare only one set of disclosures.
Organisational comparability
In the meantime, the report notes that organisations should report information in a way that enables comparisons to be made within the organisation, against other organisations within and across industries and sectors, and between different reporting periods.
It recommends that corporate reporters collaborate with other organisations and industry associations where possible, to align sector-specific metrics, policies, approaches and methodologies.
It is not enough to have good-quality information – how that information is delivered is just as important
The report stresses that in this age of misinformation and distrust, ‘it is crucial that corporate reporting is reliable and trustworthy’. It notes that it is not enough to have good-quality information – how that information is delivered is just as important.
Information overload and boilerplate or duplicate disclosures are a particular concern, and the report recommends that organisations should determine the most suitable mode of communication to fit the needs of their intended audience: ‘This includes considering whether information should be published in a combined or integrated report, or as multiple separate reports to cater to specific stakeholder groups.’
The report is intended to support policymakers as they develop standards and regulations, to help organisations communicate high-quality, decision-useful information, and to help senior management and professional accountants gain a better understanding of the continued relevance of the principles of corporate reporting and how they are adapting to an evolving world.
