COMPANIES focus their performance reporting, strategic discussion and risk assessments on short-term financial objectives, resulting in significant gaps in the information reported to investors, a KPMG report has found.
The Big Four firm found 44% of businesses do not look beyond short-term initiatives when discussing strategy. Only 9% provide a five-year track record of operational performance, while only 11% show how a company’s risk profile has been managed over time.
In all, 270 annual reports from larger public companies in 16 countries were evaluated in to KPMG’s second annual Survey of Business Reporting.
Given annual reports are averaging 204 pages in length, KPMG called for “better focused” reports rather than longer tomes. The firm’s analysis showed financial statements made up 42% of each report surveyed, while just 15% of each report provided information on performance and prospects, and 14% on business and strategy.
Currently, few reports show how a business is progressing against its operational priorities, KPMG claims. Its research showed around 17% of reports tell investors whether the business is winning or retaining customers, while only 7% provide information on order-book or sales run-rate to explain how the baseline performance of a business has changed. Indeed, 73% of the reports surveyed did not discuss customer-focus as a key business objective.
“Financial information is not the only data that matters to investors,” said Mark Vaessen, global head of IFRS at KPMG International. “When evaluating a company, investors also need to be able to assess the health of a business, its growth potential and the long-term sustainability of its earnings.”