THERE IS an awful lot changing in the world of corporate reporting and one has to wonder whether companies are quite ready for it. They will need to be prepared for new material, with further changes also coming down the line.
Effectively there is a new framework for narrative reporting for UK companies. This will require UK corporates to discuss strategy and their business model, and to make some substantial disclosures regarding diversity, at least among men and women, and human rights issues.
Greenhouse gas reporting is now mandatory for quoted companies. There are now very extensive disclosure requirements relating to directors’ remuneration, requiring graphical and other analysis, some of which will be based on data that most companies don’t collect as a matter of course. One does wonder whether the blunt use of disclosure as a government policy tool isn’t punishing the many for the sins of a few.
At the same time as all these changes are being made, the new corporate governance code comes into effect with its requirement for the board to confirm that the annual report is “fair balanced and understandable”, when taken as a whole, and provides the necessary information for shareholders to asses performance, strategy and the business model. Given that many shareholders are already complaining that there is too much to digest to tell the wood from the trees, this hardly sounds like a rallying cry for simplicity.
Much of the additional burden above will fall on audit committees, as will nearly all the reforms that are likely to arise from the final report of the Competition Commission when that is published in October. Its initial remedies for the market worked considerable further burdens at the audit committee’s door.
While most of these reforms, but not all, make sense, early thought needs to be given to the resource that boards will need to deploy in additional support of audit committees, in particular, and how companies can source and be assured of the additional information that they will need for the future. It’s time for corporate reporting to be brought back into the boardroom.
James Roberts is senior audit partner at BDO