Although the quality and strength of financial reports have
improved in recent years, there is still room to develop narrative
reporting, according to a new study by the International Federation
of Accountants.
The report, Financial Reporting Supply Chain: Current
Perspectives and Directions, found that efforts to strengthen
financial reporting in recent years have resulted in improvements
in corporate governance, the preparation of financial reports and
the audit of financial reports.
Survey participants indicated that convergence with international
standards, enhanced regulations governing financial reporting and
improved internal control over financial reporting systems all
contributed to enhancing the reliability and relevance of the
reports. Improvements to audit standards and practices as well as
strengthened independence rules also were factors in enhancing
audit quality, respondents noted.
However, investors and other stakeholders are still finding it
difficult to make sense of the figures due to insufficient
narrative reporting on company strategy and other areas.
“They were concerned about the usefulness of financial reports
primarily because of the complexity,” commented Norman Lyle, chair
of the Financial Reporting Supply Chain project. “Directionally,
they would like to get more business information, more narrative to
explain the business strategy and so forth. A lot of focus in
recent years has been on numbers, the financial side, very much
linked into accounting standards. If you look at some of the big
banks in particular, you’re looking at about 300 pages plus in
their annual reports. A lot of the information is in the form of
footnotes and getting an understanding of that is incredibly
difficult.
“I think a lot could be done to improve the outputs to explain to
stakeholders what the business strategy is, what objectives are,
what the aims are – more forward looking.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataMore than 340 participants from the financial reporting supply
chain took part in the study, including investors, preparers,
company management and directors, auditors, standard setters and
regulators.
