Financial reporting in the shipping industry is improving but still lags best practice, according to a KPMG study into the reporting practices of the world’s biggest shipping companies. However, the sector is showing signs of becoming more transparent as stakeholders demand more regular, detailed and comparable financial information.*
The survey reveals that a third of the world’s biggest shipping companies still produce no publicly available accounts, although this is a slight improvement to 2008 when KPMG undertook its first survey and found that 44% percent of shipowners did not have annual reports. This year’s survey also found that more companies are reporting in line with the International Financial Reporting Standard IFRS which means financial statements are becoming more comparable between countries.
John Luke, KPMG’s global head of shipping comments: “The improvements are encouraging and perhaps a reflection of the growing demand for transparency from the sector’s supply chain and financiers. What we are seeing is a shift in both regulation and practice towards producing accounts, and producing them in IFRS which is helpful.
“Never has a good set of financial accounts been more valuable. Capital is in short supply whether this is debt capital or equity; therefore shipowners should be interested in presenting themselves in the best possible light if they are after some of that capital. One of the key channels through which companies communicate with the capital market is a set of audited financial statements, if these are up to a certain standard the more successful this communication is likely to be.”
Other key findings:
- The average annual report in the shipping industry is 136 pages long, compared to 175 pages for a FTSE100 company
- Risk reporting: 28% disclosed piracy as a key risk; the majority of financial statements also included well signposted disclosures on other principal risks
- Only seven out of 53 companies disclosed numerical information about discount rates used for impairment assessments
- General lack of KPIs: Only 3 companies provided detailed targets against which performance could be measured
- Almost half of accounts provided sustainability information in their reports
John Luke comments: “Demonstrating and communicating good governance, sound stewardship, strong performance and corporate responsibility have never been more important in ensuring access to the capital markets. There is also a need to address key performance indicators associated with operations and commercial positions when trying to attract commercial investors.”
Note to editors:
*Companies were chosen based on league tables published in Lloyds List and Clarkson (Clarkson Research Services Limited, Shipping Review and Outlook). We looked at the top 50 companies by market capital and the Top 20 companies by size of fleet. As some companies fall in more than one category, the total sample size came to 79. Corporate Reporting: Fit for Purpose, KPMG Shipping Insights Issue 4, November 2011.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
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