The Federal Government is continuing their focus on cutting red tape as our Presidency of the G20 and B20 places renewed attention on growth, investment and financial stability.
We have also witnessed the release of the International Integrated Reporting (<IR>) Framework, which, when combined with recent changes to the ASX Corporate Governance Principles and ASIC Regulatory Guide 247, clearly indicates that corporate reporting reform is well and truly underway in Australia (and the world).
To keep up with this rate of change, companies need to redefine their corporate reporting strategy and review their corporate reporting portfolios.
This is essential at all levels from CFOs to boards to investors.
"There is no doubt that the way organisations create value has changed and traditional financial reporting can no longer meet the information needs of all stakeholders."
Leader, Better Business Reporting Group
A critical role
Such reforms will not only help 'cut reporting red tape' and realise our 'growth agenda' but reduce the volume and complexity of corporate reports, which will save money and provide clarity and more meaningful information for report users.
This is exactly what the Third Edition of the ASX Corporate Governance Council's Principles and Recommendations (ASX CGC Principles), released in March 2014, looks to help achieve – by requiring director oversight on all corporate reporting content (not just financial reporting) and the processes employed to independently verify and safeguard the integrity of the reporting.
Updated guidance, ASIC Regulatory Guide 247: Effective disclosure in an operating and financial review
– March 2013, sets out clarifying guidance for the Directors' Report, bringing disclosures about companies’ business strategies, risk and prospects for future financial years front and centre.
In addition, the release of the International Integrated Reporting <IR> Framework, which, as noted in the KPMG Australia publication, CFOs driving the corporate reporting reform agenda
, "...emphasises the need for companies to communicate their value creation story in a more holistic way, focusing on the strategic objectives, business model, value drivers, risks, performance and outlook, acknowledging the reality that investors (and other stakeholders) rely on more than just the financial statements when making capital allocation decisions. <IR> is concerned about the 'story behind the financials' and how well the organisation is positioned to be successful into the future."
Collectively, these changes to more holistic reporting will require companies to redefine both their corporate reporting portfolio and reporting strategy.
Beyond the red tape
But they will also provide a range of opportunities for Chief Financial Officers (CFOs), directors and investors.
For directors, changes to the ASX Corporate Governance Principle 4 aim to bring all corporate reporting within the realm of director oversight. This places increased pressure on directors to develop a corporate reporting portfolio that not only removes clutter, duplication and misalignment, but that better meets the needs of investors.
However, it also provides the unique opportunity to use these recent changes to streamline their company's corporate reporting portfolio through a reporting strategy designed to reduce the volume and complexity of their current corporate reporting and better enable investors to make decisions about the company's capital requirements.
To gain deeper insights into the changes and opportunities for directors, please download the KPMG Australia Oversight of corporate reporting by company directors
CFOs, who are well placed to lead their organisation in developing a strategically aligned corporate reporting portfolio that better meets the needs of shareholders, can also take advantage of these reforms, ultimately, by helping to deliver a more relevant, streamlined portfolio of reports they can help both their organisation and their investors. For a complete overview, please download the KPMG Australia CFOs driving the corporate reporting reform agenda
And speaking of investors, these changes signal the need for them to become more involved in developing a corporate reporting environment that not only best meets their needs but ensures clutter, duplication and misalignment across reports is a thing of the past. This will, however, involve engagement from both sides.
To discover more about the issues and opportunities available for investors, please download the KPMG Australia Corporate reporting reform: Better alignment with investor decision-making
A long-term journey
Today, reports must talk about the entire business and provide truly relevant information – while reducing their volume and complexity and saving organisations time and money.
This is why business must be serious about enacting these reforms and focus on the opportunities, not only the challenges.
Only then can they (and their investors) go beyond even their own expectations.