Corporate reporting

All parties involved in the corporate reporting debate agree that numbers aren't enough when communicating company performance. But the debate continues over how best to inform the market as businesses search for a reporting model appropriate for the 21^st century.

Chancellor Gordon Brown's decision to replace the statutory operating and financial review (OFR) with a 'lighter-touch' business review (BR) was largely welcomed by the business community, however, evidence suggests that many companies remain committed to the narrative reporting agenda that the OFR would have helped to usher in.

While the business review was introduced to replace the mandatory OFR, it is important to acknowledge that there are a range of points upon which the two requirements overlap. For example, both require companies to report on:

• key performance indicators (KPIs)
• principal risks
• employee, environmental and social issues, and
• trends and factors likely to influence future performance.

Unlike the OFR, however, the BR is not supported by guidance and industry is still awaiting clarity on what a BR should look like.

A recent PwC survey assessed the preparedness of a cross-section of companies to meet the obligations of the BR. The survey looked at companies with a March year end, to assess how they were beginning to respond to the BR's requirements.

While findings from this preview highlighted significant improvements in reporting, nearly half of the companies surveyed were still struggling to meet the basic requirements of the BR. For example, most companies reported on their strategy, but just over 40% of companies failed to clearly communicate their KPIs or their principal risks and uncertainties. Many companies also failed to provide a clear link between their strategy and KPIs.

Evidence also suggests that many businesses remain committed to the notion of narrative reporting, and therefore intend to push ahead with producing an OFR, on a voluntarily basis.

As the business world moves towards a more narrative-focused reporting model, PricewaterhouseCoopers is committed to helping companies negotiate this shift and meet the widening needs of investors and stakeholders. To support companies in this endeavour, we have compiled a directory of the best narrative reporting from around the world. Log onto www.corporatereporting.com to read more than 40 real-life examples of what we believe good reporting looks like.

PwC's specialists have also joined forces with other leaders in the campaign for better reporting. Under the banner of Report Leadership, this group aims to challenge established thinking on corporate reporting. We have developed simple, practical ways to improve narrative and financial reporting, based on input and feedback from investors. To make our ideas realistic, we've focused on what is achievable within the current IFRS model by improving disclosure and presentation.