Compared with a year earlier, more than 30 percent of companies included extra information on strategies and prospects; almost half included enhanced business risk information; and 30% either included a discussion of their financial position for the first time, or gave more in-depth analysis than previously.
Duncan McLennan, National Managing Partner – Audit, KPMG Australia, said: “It is encouraging that many companies are making additional and better quality disclosures. By providing a clear explanation of their business model, value drivers, risks and prospects, companies are improving their reporting for investors and other stakeholders.”
But the study’s observations also included many instances where further improvements could be made:
- There are many different types of corporate reporting. Some information in media releases would have been useful to include in OFRs
- Focus has been predominantly on revenue and income items, to the exclusion of key expense items like impairments, restructuring and operating costs
- Many companies’ disclosures include only short-term focused prospects and strategies and boilerplate risk discussion
- Fewer than 50 percent included their OFR in a single section in the annual report.
The study also considers how companies producing OFRs may wish to take the next step in telling their value creation story, following the publication of the international integrated reporting framework recently.
Duncan McLennan said; “Our research shows that many companies are starting to go beyond the basic disclosure guidance of RG247, in better articulating their strategy, and the alignment of risks and performance to their strategic objectives. Companies wishing to further enhance communications with their stakeholders may wish to consider building on their OFRs by bringing in some of the principles of integrated reporting which focuses on increased disclosure of business model, strategy and risk identification and mitigation”.
*In March 2013, ASIC released Regulatory Guide 247 ‘Effective disclosure in an operating and financial review’, to provide guidance to listed companies preparing OFRs under s299A(1) of the Corporations Act 2001. The OFR continues to be an area of focus for ASIC in 2014.