The Australian Institute of Company Directors and Pricewaterhouse-Coopers have prepared a new report aimed at improving disclosure to shareholders.
The Australian Institute of Company Directors and Pricewaterhouse-Coopers have prepared a new report aimed at improving disclosure to shareholders.
The Shareholder Friendly Report was developed to break through the complexity of current reporting requirements the institute believes has made gaining an understanding of company performance much harder.
Written from a non-technical perspective, the report endeavours to provide an example of how to prepare a comprehensive scorecard on a company’s overall performance.
It follows an internal research paper prepared by the AICD at the end of last year into shareholders’ understanding of company reporting, which found a significant number of investors failed to properly grasp many of the complexities in corporate reports.
The structure of the report is based on a decade of research by PwC into the information needs of various corporate stakeholders. Summarised financial information, with limited explanatory notes, is one of the overall aims of the report, according to the authors.
Included in the proposed reporting method are a chairman’s review of strategy and governance, chief executive’s review of operations and risk management, summarised ‘user friendly’ financial statements, a directors’ declaration, an auditors’ report, along with summarised divisional reports to give shareholders an insight into what is occurring within key areas of the company.
So far the report has received a positive response from the Australian Securities and Invest-ments Commission and the Aust-ralian Shareholders’ Association, according to AICD WA vice-president and Alinta director, Fiona Harris.
It reports not only the historic results and trends against key financial and non-financial strategies, but also the company’s outlook for the future, she said.
At this stage, the report is aimed at “thought leadership”, rather than regulation, Ms Harris said.
She said if the view was taken that this kind of reporting was the right way to go in the future, then the AICD could look to government for support in the form of legislation.
With the increasing complexity of reporting requirements, information provided to shareholders on company performance is becoming less meaningful without expert translation, according to the AICD.
In most cases, Ms Harris said, many of the ‘mum and dad’ investors in companies were required to read through 60 page or more documents to gain an understanding of a company’s performance.
The Shareholder Friendly Report is aimed at standardising reporting, she said, with the view of simplification to cater for the largest number of shareholders as possible and not just institutional investors.
For shareholders who wish to conduct deeper analysis, the full annual report, produced to satisfy legislative and regulatory requirements, would still be available either online or in hard copy under the proposed method for disclosure.
