Breaking Boundaries: the future of reporting

Date: Tuesday 17 November 2020
Time: 10 - 11am GMT
Location: Virtual

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At this event, we discussed the key themes of the FRC's new paper on the future of corporate reporting with Paul Druckman, chair of the advisory group behind the paper, and Deepa Raval, Director of narrative reporting at the FRC.

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Breaking Boundaries: The future of corporate reporting

Mark O'Sullivan

As many of you will know, annually we look at the reporting practices of the entire FTSE 350. Over the last 15 years or more, we’ve witnessed the slow but steady improvements in the reporting around strategy, business model risk, governance, and more recently stakeholders and companies’ role in the society.

But those of you, regular attendees at our events, will have heard me air my frustrations on how the improvements in reporting tend to move at glacial speed. You will have heard me echo criticisms often levelled at corporate reporting at increasing lengths, and the generic nature of much of the content. Scratch the name out of the top of the page, and you would be challenged to name the industry, let alone the company from reading the content, how the information lacks a forward-looking orientation, and it's often disjointed and reported in silos.

For example, in our latest report on reporting practices in the FTSE 350, which we published in September, we found a 13% increase in the length of annual reports since 2018, 95% of companies setting out strategic plans at either a high level or with more detail, yet over 60% provide no sense of the timeline being considered; while a third, the 35% only look out over the next year, still some way short of 3-year viability period.

While there has been substantial increase in content in the annual report, much of it feels very disconnected. Only around 60% align their risks or KPI as a strategy, while only just over 20% align strategy with sustainability activities. Reflecting back on what I’ve seen over the last 15 to 20 years, I am left with a bit of a dilemma. I recognise the hard work that many companies continue to put into their reporting, and if I was to compare most reports with their equivalent from 10 years back, that would be like chalk and cheese.

But after so many years of this slow and steady progress, I have to ask myself whether the net effect is enough. In an age of technology, with new attitudes towards accountability and the role of business in the society, and communication tools to back it up, is the focus of the predominantly backward-looking PDF document appropriate?

I spend a lot of time thinking, and some might say too much time talking about the future of reporting, where we are looking at the mechanisms for frequency of delivery, the impact of technology, or how users will access and analyse information in the 21st century. Therefore, with great anticipation, I awaited publication of the FRC’s recent paper on the future of reporting, and I am delighted to be joined today by two of the individuals behind this development, to hear more about the proposal set out.

Firstly, I would like to introduce Paul Druckman, he is chair of the FRC’s future of reporting advisory group, and chairman of the world benchmarking alliance. Paul, could you provide bit of an overview to the project, its ambition, approach, and output?

Paul Druckman

Sure, thank you very much, Mark.

I have actually been in the reporting space at least as long as you, and certainly have seen some ups and some downs. I have to say, at the moment, I would say, there are a lot of ups, not just with our report, but with a lot of what’s going on, and I suspect there will be questions, about that after our presentation of our report. It's delightful to see Simon Gledhill, one of our advisor group members on the call, and Simon, maybe, we can call on you to respond to some of the questions at the end. I hope we don’t get it wrong, but that’s up to you.  Also, one of the FRC team, Yasmin Shaheed, who was working with Deepa on the project.

The point you just made, Mark, is key, is that what we set out to look at was the corporate reporting system, not which frameworks and standards, or do we need new frameworks and standards, and that sort of thing. That’s the discussion that is so prevalent at the moment, and I am all for that, but we needed to step back and that’s what we set out to do.

The very first point that came out, which I don’t think anybody would be surprised at, was the volume and complexity of the annual report. I found this image yesterday, and it just was perfect. From all of our corporate members of the advisory group, and certainly its not unknown that, the complexity and volume, as I said, of the annual report, it just isn’t fit for purpose. Especially, in these times where we are looking to expand the information and transparency that not only the capital markets want and need, but also the society and others want and need. What we also need to do, and you mentioned it briefly, Mark, in your introduction, is we have a completely different context.

We have, and many people have heard me talk about this endlessly in panels and things like that, but the sustainable development goals, however, much you applaud or decry them - we have a serious crisis in the world around nature, or biodiversity, whichever term you want to use, around climate change, and of course around inequality, as three central pillars. We need to make sure that the business is driving towards an outcome, which fulfils the sustainable development goals. Great moves in the UK only, was it last week, I think, Mark, with the announcement from His Majesty’s Treasury around climate reporting becoming mandatory, and great news simply from a climate and SDG point of view, with the President Elect that we have in the US, which should help significantly.

The next point is really around technology. After qualifying as a chartered accountant, I moved into the world of software, accounting software sadly, but nonetheless software, and spent most of my career in that. What I just cannot understand is why we haven’t moved on from the PDF and are trying to use technology to create better transparency and better understanding. The part of it is because we’ve been able to scrape and use PDFs more than we ever thought we would, but the idea of corporates pushing information to users, and users only have a pushed information rather than users being able to pull information in a way and a style that they want to see and understand it, is something that we have the technology to do, we just don’t use it in the corporate reporting sense that we are talking about today.

What we set out to do in the project, this was probably more where I was fascinated by the project, possibly more then where the FRC board was coming from, but sitting on the board at that time, it was relatively easy to get those things happening. But what we wanted to do was also to do this blue-sky thinking, stepping back and understanding not just how to incrementally change things, but what is it that was needed, as well as, some ideas around what might be adopted. In my view, and Deepa can talk about this as well, we got to think of this report not so much as what we have to do tomorrow, but what can we build on based on the concepts and insights in the report to create a modern fit for purpose corporate reporting system?

We just go into the next slide, which is actually that graphic is in the report, but we’ve already talked about stakeholders expectations with the SDGs and even with stakeholders at all sorts of level, from suppliers, and customers, and employees right the way through, and through to the big evolution in non-financial reporting, and also the connectivity of reporting, which I was involved in, and actually noticed very quickly earlier that, Ferny Robinson is on the call, he is another advocate of integrated reporting and all that brings.

Those are the key challenges that we needed to meet, and that we strive to address some of them. If I just finish by looking at how the project was, if you like, the governance and structure to the project. If we look at the left-hand side, there is the board advisory group, which I chaired, and was an incredibly effective group. We didn’t always agree, but we never lost our tempers with each other, and it was a very good discussion that went on. You would be surprised at how much the team had to revamp things, because of various discussions, both with informal consultations and research, as well as the challenge from the advisory group.

The FRC set up a set a board subcommittee, so that what we came up with wasn’t a huge surprise to the board, and they just said, ‘well thank you very much, but no thank you,’ but at the end of the day it was endorsed by the FRC board. I have to say, the report in general was finished, it was around February, wasn’t it Deepa, of this year, but changes at the FRC and other obstacles meant that the report wasn’t released until last month.

But a big thank you to the project team, and Deepa who led the project as the project director; and also to the executive director, who up until Easter time was Paul George, who really engaged in this work; as well as originally Steven Haddrill as the CEO; and then John Thompson as the new CEO, have engaged with the project, it has been very interesting.

Now I am passing back to you Mark, is that right?

Mark

You are indeed, thank you Paul, that’s useful background.

As Paul hinted at, next I would like to introduce you to Deepa Raval, project director, and also director of narrative reporting at the FRC, who is going to spend some time adding some more flesh on the bone and provide more detail on the ideas put forward in the paper, so over to you Deepa.

Deepa Raval

Thanks very much Mark and good morning everyone.

What I’d like to do this morning is just take you through an overview of the main proposals that we’ve set out in this paper. This slide really sets out the various components of this discussion paper. One thing I will say at the outset is, we’ve included a number of ideas in this paper, and this is very much thought leadership, and starting point for the discussion and debate. Although, we present this model in its entirety, this is not intended to be an all or nothing approach. As we are thinking about comments and feedback on the paper, please feel free to pick on those areas that you think may need improvement. Equally, let us know which parts of the paper you like, and which ones we could take further. This is really setting the scene for our proposals.

Essentially, the paper is covering two or three key elements. The first is to develop a bit of a conceptual framework for corporate reporting as a whole. One of our aims is to develop a principles-based framework. We see this work as being very complementary to the proposals that Kingman has outlined as well as those of Brydon. We will see how this fits together as a principles-based framework for corporate reporting, would then be supported by principles-based framework for corporate audit, and then supplemented by any regulatory changes that are envisaged by Sir John Kingman.

In terms of the key elements of our proposals, first of all, we developed a definition of corporate reporting for the purposes of this project. Really, what we are trying to do here, at a simple level, is say that the definition of corporate reporting needs to be all encompassing and incorporate the complete set of corporate communications that our company produces. We’ve also widened the definition that we adopt, that’s typically found in financial reporting. We are expanding it to include not just the information needed for investors, but other stakeholders as well. As we went through this project, we often came up with the question of what is it that you mean by stakeholders. The approach we’ve put forward in the paper is that its for the company itself to determine who its key stakeholders are, so the intention here is that we don’t cover every single potential stakeholder that might have an interest, but focus on the key stakeholders that are of relevance, that a company may need to provide information for.

That was really our starting point, and within that we built on that concept, and thought about how we develop an objective driven reporting framework, and develop communication principles that could go across corporate reporting as a whole to promote cohesiveness across the reports.

One of the key shifts in our thinking, is to move away from the traditional approach, thinking about the use and needs, to an objective driven model. We thought long and hard about the range of uses that might have an interest in corporate reporting. We also conducted a survey of stakeholders, not just the investors, but a range of stakeholders. Interestingly, what that revealed was that the information needs of stakeholders, and wider stakeholders, and investors, and investors themselves often tend to overlap. Hence it was no longer possible to draw bright lines and say that this particular report specifically meets the information needs of users. Instead, we developed a model that was based on the objectives of the particular report, which drives its content, and this slide really illustrates our thinking in this respect.

We talked about the communication principles that would apply. We have two types of communication principles that we set out in the paper. The first type of attributes, and we call these system level attributes. We see the system of reporting as being connected and the idea here is these four boxes would apply to across the system as a whole, across all the corporate reports that company has produced. If I just take each one in turn, thinking about accessibility. Here looking at corporate websites and other information, we noticed that not everything is always in one place and easily available to everybody. The idea here is, we were thinking of having something in future along the lines of AIM Rule 26, where you perhaps have a landing page on a company website that shows you the complete index of the company’s corporate reports, so that was one element. The accessibility concept also ties into technology, how can technology be used to make this information more accessible. Connectivity is a really important theme in this paper. What we are trying to create here is a connected system for reporting. One of the questions I keep hearing is, is this taking us away from the concept of integrated reporting, and the idea is not to do that, this is still a connected system. Again, we believe that technology will help us establish some of those connections.

Then we have a principle around consistency. Here really the best example I can give is, we are thinking of things like alternative performance measures. Alternative performance measures quite rightly maybe reported in different types of corporate communications, is the information being provided on a consistent basis across all your corporate reports.

Finally, transparency, thinking about all the impact of the company’s activities, transparent, so this is not just about the impacts, but does your corporate reporting fairly reflect the positive and negative aspects of your business. We have these system-level attributes. In addition to these, we have communication principles around the content. These are, for those of you that might have seen that guidance from the strategic report piece, it is really about how you write your reports, and thinking about things like brevity, comprehensibility, and usefulness, which is the terms that Kingman uses, the FRC in the past has used clear and concise, but thinking about how you communicate this important information.

The centerpiece of our model is this idea of a reporting network, and what this visual is trying to show is that this is a dynamic concept. It’s intended to be a model that evolves every time. We’ve included three illustrative reports in our model, the business report, the financial statements, and the public interest report. We envisaged that these would be core reports in the future model, but there would be new reports, perhaps some of the existing other reports would remain depending on the companies needs and the interest of its users. Again, the dotted lines are intended to show that this information is connected. I will talk more shortly about the business report, but we see the business report as providing the connections to other information.

This is the visual of the reporting network that’s set out in the paper. What this illustrates is, the business report is at its center, but we envisage that this model would have series of network reports, and those network reports would be driven by number of principles. For example, some of the reports could provide supporting detail on the matter that’s contained in the business report, some of those reports could be a special purpose report, such as the gender pay gap report that we have today. The model facilitates other periodic report. An example in the current world would be the half yearly reports, but also, we want to, using technology, try and reinvigorate this idea of standing data, which was first discussed by the FRC as part of its work on cutting clutter. The idea is, if you have information that doesn’t change from year-to-year, does it really need to be in this central document, which today is the annual report, but in future would be something like the business report.

Again, just to reiterate some of the principles that we have. Each report within the reporting network would have a specific clearly defined communication objective, and there would be communication principles that surround that reporting. Again, it’s a model that would have a mix of mentoring voluntary reports, so still allow regulators to mandate some reporting requirements, but also allow the flexibility for companies to determine the reports that are most relevant to them.

Again, one thing that we often receive questions on is, do we still intend to keep the concept of periodic reporting like we have in the annual report, and the answer is, ‘yes.’ One of the earlier discussions we had with the advisory group, is do you still need some periodic reporting, and the answer was, ‘very strongly in favor of that.’ We see things like, the financial statements, the business report, and potentially the new public interest report that we are proposing to be part of that annual periodic reporting cycle.

If I just draw down a little bit into the business report. Fundamental to this is the purpose of the business report, which we set out in the paper. This is essentially a report that’s about the long-term value creation of a company. The content that’s listed there is not dissimilar to what you might see in a strategic report today. We see some of the content as an evolution of the strategic report. Again, part of our stakeholder survey involved asking stakeholders about what content is useful to them. The key themes that came out of that were the financial statements were very important, but all of the disclosures that you typically see in strategic report are increasingly important. That’s what the key elements we see as the new business report.

Moving on to the public interest report. This is a new idea that we really want to test with us, our stakeholders. The idea here is that we want to introduce a report that focusses on public interest reporting, that has perhaps more rigor around it than current information that might be contained in sustainability reports. For example, we do intend it to be containing comprehensive information on a company’s impacts on wider stakeholders and the environment and underpinned by standards and metrics. This is the idea that we want to bring together and certainly like to obtain your feedback on.

Materiality is still something that we incorporate in this paper. We take a different approach to where we are now. What we say at a high level is, we don’t intend to change the definition of materiality, but say that there will be different lenses of materiality depending on the report. By way of example, as a general principle, materiality will be determined by reference to the objective of a particular report. An example of that on our network model would be the materiality applied for the financial statements would be that that’s set out in IFRS. For example, the materiality for the business report would be judged by reference to the information that’s relevant to value creation. Materiality, for example, for a public interest report will be judged by reference to what’s relevant in terms of the company’s wider impacts, that’s really the idea here.

As Paul has mentioned, there is lots of exciting developments on nonfinancial reporting, and given the importance of this area, we wanted to give this particular part special emphasis in the paper. We do see nonfinancial reporting as an integral part of the reporting network. The business report, for example, would continue like the strategic reports to date to have some reporting on the broader matters that may affect company’s performance over the longer term, so that would be embedded. The system we would like to move to and certainly we’ve seen the IFRS foundation moving in that direction, is to have standards for nonfinancial reporting at a similar level that we have for financial reporting today. This paper sets out our support for that direction of travel. Equally, we think there needs to be more comprehensive information on these wider matters and so we propose this idea of public interest report.

With that, if I just briefly outline some of our next steps. The feedback to this consultation would really drive our next steps and will work out, which areas we need to take forward. Some of these will require regulatory change. We see this is a 10-year vision rather than something that’s going to come about overnight, but there might be aspects that we can take forward, such as some communication principles as best practice guidance, and to merit the improvements in the quality of reporting. The paper is open for comment until 5th February 2021, and really encourage all of you to respond and continue to engage with us.

With that I will handover to Mark.

Mark

Thanks Deepa, that’s been really helpful, and thank you Paul for the introductions.

Can I remind you that to get the most out of this, please ask any questions you might have on the ideas that both Deepa and Paul have put forward. There are hopefully two ways to submit questions. I’ve already seen that three have come in through the Q and A function. On the top right, there is a triangle, circle, square graphic, and if you click on that, you can see there is a Q and A function, or you can simply just add your question in to the chat function itself.

Before going into some of the specific question itself, just a question more broadly on the scope of project, couple of questions. I am conscious that at the outset of this project there was a real debate about how far it goes in the scope of the project. The future of reporting is an exceptionally broad canvas as Paul you suggested at the outset. With that in mind, I was wondering whether you might be able to provide a little color on the process, the thinking behind. The emphasis in the paper on the content of the annual report. There are number of references, as you said, the network and user of technology, but a lot of the emphasis or the focus is on the annual report. In terms of the thinking about the breadth of the project versus focusing on the annual report would be one.

Aligned with that, and Paul you mentioned it, there is a lot going on around the regulatory reform agenda and the global reporting agenda. To what extent has the development of this paper, or the next steps, have you reached out to a global network, to other bodies globally in terms of how does this fit in, to what’s going on elsewhere, and I don’t mind who answers either of those.

Paul

Well, Deepa do you want to pick up on scope and I will pick up on the regulatory reform.

Deepa

Yeah absolutely, if I start with the scope. We've aimed to try to cover many areas broadly on the question of the annual report. Whether this is one of the focus areas, the comments that we often hear are the annual report is trying to serve too many purposes and audiences. Paul set out the challenges of corporate reporting today, and that is the key challenge that we are seeking to address through this paper. We had a lot of discussions over the scope, because there is almost, not just the corporate reporting piece, but do we go into corporate governance, do we go into enforcement, audit and insurance, because that is all part of the same system. What we thought is, as a first step, if we focus on the corporate reporting elements and then settling with the assurance angle, there are developments going on in terms of the Braydon review, which talked of those.

Paul

Can I just add to that, your idea about, Mark, that you mentioned that a lot of it is about the annual, we got to think of the annual report in inverted commas rather than the annual report as a document. What we are talking about is an annual cycle, or a periodic cycle, of which reports come through. As Deepa said in her comments, that we didn’t all agree, or certainly there was a significant debate about what cycle of reporting there should be. If I reread the document, we possibly have used the term annual report, when we don’t really mean annual report in the current sense of a document of which things fit into it, if you see what I mean. Its more a series of report produced periodically, is how I would gauge what we were trying to put over.

On the reform agenda, we reached out an awful lot. In fact, Yasmin did quite of a lot of analysis of surveys, we did a lot of desktop research. We had people in the advisory group, who were from organisations or certainly had great knowledge of all of the different major, especially the nonfinancial reporting world. Even people like myself, who are connected into that world were quite vocal, and we put out, we tried to engage with those that are in the regulatory reform agenda at the moment, both at the government regulated level, and the standard setters and the framework providers. I would be surprised if we missed big gaps, but you never know.

I do think, as Deepa said, that because we were looking at the system, and not the standards and frameworks, when I look at the standards and frameworks, I really think that the system that we are talking about fits really well, but it needs that consistency and the other thing for the annual reporting cycle to be credible in the information that it provides.

Mark

Thanks Paul, and questions are coming in, so thank you to everyone.

There is one, Simon, posed the first one, so deserves, I suppose, to go first, but I will combine it with one that I had, which was, in all my time in terms of engaging with companies, and certainly in the UK, I almost feel like we have the right framework for companies to report against, when it comes to the information needs, but often I would observe that companies don’t necessarily approach their reporting with the right mindset, one of transparency and accountability, more of compliance. I suppose, to what extent do you see some of the barriers for companies to embrace the ideas you put out in your paper to overcome some of those barriers in terms of the mindset, in terms of reporting transparently, or indeed what might be some of the incentives for companies to embrace some of the ideas you put in your paper.

Deepa

In terms of the barriers, one of the ideas is that this is a connected system of reporting and reporting is the second step in terms of for the system to work. All your corporate reporting within the organisation needs to be connected and have subject to the same oversight function. That is going to be one of the challenges. When we tested some of our ideas of companies earlier on in the project, we had one that basically said that we can do this net reporting network idea straightaway, because all of our internal systems are completely joined up, and we can do this. Whereas, for others reports are prepared by separate teams, that’s one of the challenges. Again, thinking about this differently, will have some initial cost implications, having said that, over the longer term this will result in a more streamlined system, because it allows you to have shorter, sharper, tighter reports, but also consider what reports are no longer needed, are the reports that are typically being produced still needed over the longer term. This is not just for companies, but also something for regulators to think about.

If I take the example, if the idea of public interest report is supported, we see some of the set public policy reports, supplier payment, modern slavery being embedded in that, so can you do away with some of these regulations through this process.

Paul

Can I just twist that, Mark, a little bit, in terms of the question that was posed. I chair a company, and we do quite a lot of acquisitions. The report that we get as a board of the acquisition proposal, if you like, in terms of what we are going to, whether we should go, or no go, is produced because it started off with the heads of terms and the strategy of why this organisation was one that we wanted to buy. We then got technical expertise and compliance involved to make sure that we were buying what we thought we were buying, and we had all the information we needed to have. Corporate reporting in the UK, we will stick to the UK, is a little bit the other way around, where we think about, what is it we have to report, and we don’t think about it. We think about it from a technical compliance point of view, rather than what is it we want to say, and what is our strategy about what we are doing. I know I am talking to the converted, I am sure about most of you on the call, but there is an analogy there that we’ve got to stop thinking technically, and the technical bit should come after the bit about what is this organisation, and what’s it trying to do.

Maybe it doesn’t work, it is just an idea.

 

Mark

You are right, and building on that idea of what you want to report, building on that question from James here, you mentioned particularly in the survey about the increasing use of data aggregators, and Paul you started by saying, talking about the information network system, putting words in your mouth around how people consume and analyze data. At the same time, what we are seeing at the moment is it’s the information thing that goes into the prelims, for example, the moves, the market. Within your network, how do those other information flows, how are they in terms of, whether we are talking about the prelims from the periodic reporting, the data aggregators, and the sources of other information, how does that feed into your proposal set up?

Paul

Just as an anecdote, what Deepa is thinking about, which came to the Corporate Reporting Council when I was chair. I was talking about the FRC analysis of prelims versus the annual report information. Actually, it was very similar, a little bit more buoyant in its outlook, but nonetheless, we didn’t come across significant differences, which is a good thing, but that doesn’t really respond to your comment. Deepa, I don’t know if you want to pick up on the questions specifically.

Deepa

Just following on in terms of where prelims would fit. Again, the reporting that would accommodate prelims as another report for a different purpose at a different timeframe, the point about other sources of information, quite rightly there are information sources that may not be generated by the company. The muddle explicitly focuses on information that’s generated by the company. The reason we narrowly defined that scope, because that would be the information that could be monitored and controlled, or subject to a regulatory framework.

Mark

Okay understood. Just picking up on a question from Elaine, one of the challenges that you outlined in the survey was around the frustration of fragmentation, complexity, overlaps, and so forth. Is there a danger of, in creating a network of different objectives with different reports, and so forth, that the total reported will increase, that there will be a greater burden on companies than previously companies had when it was quite narrowly defined? How do you ensure connectivity between the various reports? I suppose, the two, one is the sum of the parts larger than actually what we’ve got at the moment, will add to complexity; and two, how do you encourage connectivity between the two. Because I would imagine that companies already struggle even in just pulling one annual reporting together, to really have a clear owner for the content, it tends to be produced in silos. That doesn’t help companies in the way they create an integrated picture of the business. If you have a serial network of reports, how do you try and overcome them.

Deepa

One of the idea is that trying to ensuring that doesn’t happen, having some minimum content elements defined for the regulated reports, so that each report, its objective is quite tightly defined as to what it’s trying to serve, being very precise on materiality. We do want to promote this idea of linkage and connectivity, and what we would anticipate is, instead of duplicating content, you could use technology to just click on a link to where you could get further detailed information and use cross referencing and sign posting to avoid the need for duplication. Paul, I don’t know whether you wanted to add to that.

Paul

I totally endorse that, we got to stop thinking about the report in the form that we are used to, and we’ve got to start thinking about information that we are drawing from a website, or whatever it happens to be, some sort of analytical tool that we are using to interrogate the information that we want to see. In that way, if the information isn’t connected, then it becomes impossible to do that, because a team needs to. If you are doing a report to a particular stakeholder, or you are doing a report for a particular objective, you can’t then say, ‘well, where is that information.’ That information has to be in a central place, which everybody is using. To me it is about keeping a central core of data and a central core of strategy, and all the other elements that go towards what comes through from the board or from the management team, and it’s that key. Don’t think about you are going to have more reports, its about how do we pull that information, effectively a warehouse of information that the company produces.

Mark

It feels like, this is just one idea to put out there for a debate as we are having, but to make something like that work, you need the right technology to be able to bring all that information together. That one network of company reporting, as well as data aggregators and so forth, because one of the things that I’ve heard, frustrations with, for example, company websites and online reporting is a lack of certainty from users around boundaries, how far down the rabbit hole do you go. Constantly though, you can link one thing to another thing, when do you stop. I don’t need to have that sort of technology in some way shape or form, just set its own parameters about what you look for and so forth.

Paul

Mark, all I can say is, if you look outside of corporate reporting, its there, and its being used, analysis and analytics from within corporates. If you go down the production lines and things like that, its already there, we just don’t think about using it in corporate reporting, it staggers me. If you are looking for a standing desk, even on Google, just being silly, being flip up, because I was looking for one yesterday, because I am fed up of sitting down all the time, but if you are looking for a standing desk, you set boundaries, and you set parameters, and you then let search engines go and find what you want, and you make decisions. We’ve got to start thinking in those sorts of term. It is not as simple as that, but there are tools that do these things.

You don’t believe me, Mark, I can tell that.

Mark

I absolutely do, but if I am being honest, I expected more on the technology and that side of things in this paper, if you see what I mean, because the technology section itself is quite brief, and it focuses on tagging and iXBRL, rather than the concept pool that you are putting out there, that would bring this model to life, I think that’s where I was looking at.

Paul

That was in an earlier version of the report Mark, that’s the problem, never mind dealing this through a regulator, because I am not there any more I can say that.

 

Mark

One of the question by Rachel, it is something that you mentioned, applicability, and in terms of the size, the scale of your proposals, and which companies might implement it. Was there much consideration to the size of the organisation, how feasible this would be?

Deepa

Although, our starting point was to consider the large listed companies and the paper itself contain a section on proportionality and we see that the idea of the reporting network could be scalable. For example, for a very small company that doesn’t have very many users, we wouldn’t expect that they produce things like public interest report or a lengthy business report, we might see that their core document is just the financial statements. As we scale up looking for a company that is large, but perhaps doesn’t have a public interest element, we would expect that network to have fewer reports. Its again, although, this model is thinking about the objectives of the report, we still need to have thought to who the users of that information are, so we wouldn’t necessarily be promoting a system where everybody has to do the same reports on a mandatory basis.

Mark

Understood thank you. I can’t believe we’ve only got 4 minutes left at this, and I’ve not even scratched the surface of the questions I had. If any one has got any burning questions, please ping them now.

There were two concepts, that I would appreciate a little bit more on, and that is the overlap or the distinction between the business report and the public interest report. The introduction to the paper emphasizes the growing importance of the impact on societies, stakeholders, and so forth, and you’ve got a business report that’s stakeholder neutral, and then you are a public interest, but in my mind I could see an overlap in the content, so do you distinguish between the two.

Deepa

Certainly, one of the distinguishing features would be that for the business report, you would include information on companies’ wider impacts to the extent they are relevant to value creation. On the public interest report, we see that you include information on companies’ wider impacts that are aligned to the objective of public interest report, so is your content meeting the public interest objectives. There will be some overlap, but also, I see the public interest report is providing a lot more detail, so the idea with the business report is to try and keep it reasonably concise, and not expand on it. That materiality is one area where we see the distinction, but also in terms of the objectives of those two reports being quite different.

Mark

Okay, I understand. Many thanks for joining us today, Deepa, Paul, for sharing your insights; for everyone for taking part, listening, and posing questions. I just wanted to finish I suppose with a cup, quick questions to the two of you, one that Ian posed, which was how would you define success with these reforms or these proposals; and two, for the audience, what’s the one thing that you would encourage them to do.

Deepa

In terms of the measures of success, for me, would be to overall reduce the complexity and have a more effective system for delivering information.

Paul

To me defining success would be that people stop thinking about the annual report and adding to it and start to think about a new system of how does that look. It doesn’t necessarily have to be the way we’ve described it, but we thought long and hard to get to this system. The one thing I would encourage people to doo, difficult as it may be, is to try really hard to stop worrying about standards and frameworks, which are vitally important.

Worrying is the wrong word, Mark, but to just sit back or stand up, at your standing desk, and think about what it is that corporate reporting is trying to deliver.

Mark

That’s fantastic, so thank you everyone for joining us on the latest in our series of workshops, it is much appreciated. I can’t believe the hour has flown by. Please engage with the paper, as Deepa said, the closing deadline is the 5th of February, so I would encourage you all to air your thoughts back to the FRCs, only by engagement can we move this reporting agenda forward.

With that, I hope you have a good rest of the Tuesday.

Contact us

Mark O'Sullivan

Mark O'Sullivan

Head of Corporate Reporting, PwC United Kingdom

Tel: +44 (0)7730 304057

Elaine Forrest

Elaine Forrest

Corporate Reporting specialist, PwC United Kingdom

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