The future of financial reporting: accountability and transparency will help understand how businesses operate and perform
The demand for improved corporate accountability transparency is driving the shift from global accounting and reporting standards to additional disclosures around areas such as environmental or social responsibility and the adoption of XBRL for electronic publishing of financial results.
The global financial crisis has resulted in widespread criticism of public markets, and the flow of new European regulations have been enacted to foster confidence and trust. In spite of the investor's global view, the reform and legislative initiatives continue to differ from the US and other jurisdictions.
Some reforms are particularly useful, and some compliance initiatives are simply lame. Fortunately we are heading more towards the principles-based initiatives, such as the adoption of Stewardship Codes and (Banking and Insurance) Corporate Governance Codes. These frameworks complement the efforts to help ensure long-term stability and growth.
Stakeholders and international investors around the world are demanding stricter, uniform and detailed corporate governance and compliance requirements not only for publicly held companies but also private and foundation owned companies. In order to comply with these demands increased reporting requirements, accounting standards, accountability and transparency are some of the issues that go beyond the complex economics created by IFRS and USGAAP because the primary goal is to understand how businesses operate and perform.
Back to Basics
Therefore in the next 3 articles we focus on The Future of Financial Reporting because finance and accounting executives around the globe must address this requirement in spite of the pressure of adapting and the enormous costs involved if these changes are not integrated and planned.
To succeed The CFO must see the opportunity to shift the quality of reporting and disclosures that position their companies in the eyes of the investment community. As with any other major upheaval or change (remember SOX?) those executives who plan and leverage the transition with an awareness of the underlying issues in a roadmap and framework will be able to fasten the new principles and technologies with the underlying requirements related to the future of financial reporting.
Improvements go beyond the financial statements
It is not due to the recent credit and financial crisis that has resulted in the Investor backlash & the new regulatory requirements, that once again are designed to restore the public trust. It was only a dozen years ago that Sarbanes-Oxley Act (SOX) in the United States, the European Union Accounts Modernization Directive, reforms of capital markets in South America, and other similar global legislation required that companies once again revamp their internal controls risk management, testing and corporate governance practices.
Now investors and other stakeholders are demanding more disclosures, improved transparency and accountability processes that reflect the inner workings of companies. Further, they wish to know the business impact on the environments in which they operate.
Stakeholder communications
Reporting of income statements, balance sheets, and cash flows is no longer sufficient-stakeholders are demanding disclosures related to executive compensation, (say on Pay) energy usage, environmental issues, hiring and labor practices, charitable programs, and other social issues that reflect the companies environmental and social responsibility.
The increased level of stakeholder interest in corporate governance includes board independence, integrity of the audit process, executive compensation, stock ownership, stakeholder happiness, and related socially responsible indices will together evaluate the corporate governance performance related to the long-term viability or sustainability.
Therefore in the next issues we will focus on the hard core issues to address the near-term changes for all companies and what the future of financial reporting look likes;
- Changing and Converging Accounting Standards
- Momentum Behind the Global Adoption of IFRS
- Increased Use of Sustainability Indicators
- New Business Performance Reporting Initiatives
At the 8th Annual European GRC Summit Mr. Jeffrey Avina, Director of Middle East and Africa, Microsoft Citizenship and Community Affairs and responsible for setting Microsoft's corporate social responsibility strategy in 79 countries, will conduct a CSR workshop.
