Navigating corporate reports need not be torture for the investors – Business Daily
Part of the feedback frequently received from investors and stakeholders regarding corporate reporting is the volume of pages within many reports. The average number of pages of financial statements, for example, has increased significantly over the last few decades.
Stakeholders usually find this challenging because it makes it difficult to separate material information from immaterial information for their decision-making. It is best captured by picturing someone drinking directly from a fire hydrant.
The overall result of this situation is making corporate reports of less utility and relevance to stakeholders. Too often, we see organisations discuss an immaterial issue using two to four pages in their financial statements while discussing a material issue with just one page or less.
The ordering of information is another aspect stakeholders find difficult when navigating corporate reports. Organisations should therefore ensure they approach reporting consciously rather than taking a compliance-only mindset with reporting regulations.
The ability of an organisation to provide bespoke disclosures and tell a unique and compelling story is what improves transparency and builds trust with stakeholders. Streamlined reporting can help organisations address some of these pitfalls.
Organisations should provide tailored disclosures when reporting. This information should address specific matters about the organisation that enables stakeholders and users to understand it considering the context of its operating environment.
An organisation should avoid duplicating information by providing disclosures once in a report. Cross-referencing should point users to locations where disclosures are to avoid duplication.
Streamlined reporting should use graphics, charts, and other visual representations in addition to plain text to make reading easy to follow for users. An organisation should also use simple language when communicating and avoid jargon that makes it difficult for users to understand their reports.
For example, some financial statements disclosure notes can be complex for non-finance professionals to understand.
It can go a long way to increase the appeal of an organisation’s reporting to a broader audience, thereby improving the utility of the organisation’s report. The ordering and presentation of information are equally important.
Organisations should always prioritise important information while placing standard information in the background. By embracing these practices, an organisation will improve the relevance and usefulness of their reports.
Akinyemi Awodumila is an Associate Director at PwC Kenya. An author who writes and speaks widely on corporate reporting topics.
