The future of corporate reporting is a subject attracting much attention of late, with a flourish of activity in this space in recent years.
In the UK we have seen an explosion in non-financial disclosures, including new requirements for the strategic report as well as additional disclosures for larger companies on matters not primarily aimed at investors—on gender pay, for example.
The introduction of the International Integrated Reporting Council’s Framework, and new proposals such as Accountancy Europe’s 2015 The Future of Corporate Reporting, have also offered a rather new approach to thinking about corporate reporting—through the lens of “value creation”.
In light of these developments and, starting from the view that corporate reporting must evolve and can always be improved, the ICAEW contributes to the ongoing debate about future corporate reporting in its latest thought-leadership report, What’s next for corporate reporting: time to decide?
The report captures the views of key stakeholders at an ICAEW roundtable and series of meetings with participants drawn from practice, business, investor organisations, academia and the regulatory and standard-setting communities.
The challenge of technology
The use of technology in corporate reporting was a key theme during these discussions, and was widely viewed as a key challenge to the advancement of corporate reporting. The consensus of those we spoke to was that despite companies seemingly willing to provide more information to satisfy increasing stakeholder demands, little progress had been made in using technology as a corporate reporting tool.
Indeed, reference is made in the report to the ICAEW publication, The Corporate Report, written in 1975, which emphasises the need for “legal reporting requirements and accounting practices” to catch up with recent “technological innovation and change”. Yet, 40 years later, only limited progress has been made—traditional paper-based reporting is still perceived by many as the principal means of communication.
However, a recent trend by UK and EU policymakers to require companies to publish information not primarily aimed at investors on designated websites may evidence a turning tide. Examples of such requirements are summarised in the report.
They include the 2017 UK gender pay gap regulations, which require larger companies to publish gender pay details on their websites, supplemented by links to information provided on a government-sponsored website. They also include UK regulations on payment practice, which require larger companies to report information on payment practices and performance twice a year on a government-sponsored website.
Presenting information in this way has been consistently endorsed by the ICAEW, as a way to address concerns that the annual report is becoming overloaded with information in order to meet the increasing information demands of stakeholders other than investors.
There was wide agreement among the stakeholders we spoke to that, in order to advance change in this area, collaboration at a practical level between standard-setters and IT specialists will be required—particularly in light of the rapid pace of technological change. We note in the report:
“Bringing technology specialists and “disrupters” into general discussions about corporate reporting will be necessary to understand the opportunities and “mainstream” technology considerations for the reporting process.”
Acknowledging the lack of progress to date in the IT space, the report concludes that the time has come for policymakers to take a decision on how best to use IT to satisfy increasing demands for information. Accordingly, the report sets out critical policy options to be considered before substantial progress can be achieved. This is one of four key policy options on a variety of issues in the report entitled Time to decide?
Data and technology: time to decide?
Should we accept that the pace of progress in the use of technology as a corporate reporting tool is likely to remain very slow, with no real impetus to change when investors already manipulate data using their own software and analyse data from a variety of sources?
Or, should stakeholders make a concerted effort to accelerate and coordinate progress, necessitating a new depth and breadth of collaboration between technology specialists and those with an interest in better corporate reporting?
The use of technology in corporate reporting is one of several challenges that are considered in the report, including how to meet the needs of diverse stakeholder groups, how to achieve consistency and credibility in reporting as it evolves, and what to do about the “intangibles problem”.
Dr Nigel Sleigh-Johnson FCA is head of the ICAEW’s Financial Reporting Faculty.