Best practices for corporate blogs

The PricewaterhouseCoopers guidance on "Best practices for corporate blogs" offers insight into the ways leading companies are capitalizing on the appeal of blogs as a form of direct communication with customers as well as employees. It also looks at how companies are leveraging blogs internally as a knowledge management tool to facilitate more effective information sharing and project management.

Reporting corporate performance online

Corporate reporting should be more informative and accessible. But, can it provide the information investors want without swamping them in unnecessary detail? And how can companies best use the Internet to do this? The Report Leadership group has published "ONLINE REPORTING: Practical Proposals for reporting corporate performance online."

Corporate reporting - a focus on accountability and communications

Companies use their annual reports to fulfill their legal and regulatory requirements and to communicate with stakeholders. Annual reports summarize all the crucial issues that affect the success of the business, explain how they have influenced the past year’s results, forecast how they might pan out in the future, and explain what is being done to ensure the company’s future success in that environment. Annual reports cannot and should not focus on every single issue that is relevant to every single stakeholder. They should focus on the issues that are material to the business as a whole, bring them together in a single, coherent story and reveal the “value proposition” of the total business. For more on this perspective of corporate reporting, refer to The Future of Corporate Reporting: State of Play – February 2007.

Excellence in Corporate Governance Disclosure

The CICA Corporate Reporting Awards 2007 (CRA) address “Excellence in Corporate Governance Disclosure for TSX-listed Companies.” The CRA evaluation criteria include reviewing the proxy circular and how the company uses technology to report this information. The corporate website is an ideal location for information about how a company is managed on behalf of its stakeholders. Some companies still confine this area primarily to a list of directors and senior management but the best sites include comprehensive details of the governance structure of the company, including committees, policies, terms of reference and recent activities — generally a comprehensive treatment of the governance approach in place.

SEC proposes improved mutual fund disclosure

The US Securities and Exchange Commission (SEC) is proposing rule changes for sending or giving key information to investors in the form of a "summary prospectus" and providing the summary prospectus, statutory prospectus, shareholder reports and other information on an Internet website in a format that enhances investors' ability to effectively use the more detailed information in those documents. In addition, the information would be provided in paper to any investor who prefers to review more detailed information in that format. The proposal is intended to take advantage of technological developments and the expanded use of the Internet in order to provide investors with information that is easier to use and more readily accessible, while retaining the comprehensive quality of the information that is available to investors today. (View the SEC Press Release.)

Clarity and plain language in annual reports

Under Warren Buffett, Berkshire Hathaway has been a model of transparency and honesty. He famously noted that he writes his annual reports as if he were writing a letter to his Aunt Alice or his sister Doris, aiming for clarity, simplicity and an absence of jargon. (Review the latest annual report for Berkshire Hathaway.)

War on Complexity

The US Securities and Exchange Commission (SEC) has joined with the Financial Accounting Standards Board (FASB) in an all-out “War on Complexity in Accounting.” The SEC’s Advisory Committee on Improvements to Financial Reporting has the overall objective of making recommendations on reducing complexity in financial reporting. It held its second meeting on November 2, 2007. Its charter identifies four areas for attention:

• the current approach to standard-setting;
• the current approach to regulating compliance;
• factors that may drive unnecessary complexity; and
• lessons that can be learned from using international standards.

Earnings guidance for investor decision-making

Overall, earnings guidance is useful for investors in their decision-making. It may, however, damage shareholder wealth when the quality of the information is low. To improve information quality, good news guidance should include more details as to why and how management arrives at a particular estimate, while bad news guidance should be released in a timely manner. (Read the article on Relevant and timely, please in the November 2007 issue of CAmagazine online.)

Corporate reporting: a time for reflection

PricewaterhouseCoopers has recently published a survey on Corporate reporting: a time for reflection. It examines the narrative reporting practices of the world's largest companies, the Fortune Global 500. The objective is to provide answers to key questions. What does the narrative discussion actually communicate? Are companies meeting the information needs of their priority audience for these strategic communications - investors? For a summary article, refer to Judging the narrative in annual reports in the November 2007 CAmagazine online.

2007 annual report trends survey

AR Trends 2007 was recently published by BarnesMcInerney and the Craib Group. The goal was to explore how companies use traditional annual reports to inform and engage investors as effectively as possible, and to collect examples of best practices. The survey used 130 Canadian and 76 US reports to collect data on 106 items and characteristics that define an annual report.

Interactive Data - Building XBRL into Accounting Information Systems

The Canadian Institute of Chartered Accountants (CICA) recently published a research study on Interactive Data - Building XBRL into Accounting Information Systems. The study explores the implementation and business process implications of tagging XBRL at different levels in an organization’s information infrastructure. It explains in non-technical terms what XBRL is, the growing usage of XBRL, how it is being applied, for what purposes and the business case for adopting XBRL.

SEC leads global move to interactive financial reporting

The US Securities and Exchange Commission (SEC) Chairman, Christopher Cox, has announced the creation of a new office to lead the transformation to interactive financial reporting by public companies (view the Press Release). Additional information is available on the SEC website at Spotlight On: Interactive Data and XBRL Initiatives.

Guide to IFRS in Canada

The Canadian Institute of Chartered Accountants (CICA) has issued a Guide to IFRS in Canada to facilitate the transition from Canadian GAAP to IFRS for Publicly Accountable Enterprises. The guide includes the Accounting Standards Board (AcSB) comparison of Canadian GAAP to IFRS, highlighting key differences and noting AcSB work in process that may affect the standard in the future. The comparison is organized in the order of the current Canadian standards. It includes a table of IFRS in numerical order cross-referenced to the CICA Handbook standard and a table of IFRS standards with no current Canadian GAAP equivalent.

Canada’s Transition to International Standards

The CICA has just launched a website to help Canadian CAs and the 4,500 public companies in Canada make the transition to international accounting and auditing standards. The site provides information on what to do and how to do it. To access these comprehensive resources, go to Transition to International Standards.

Keeping your head above water… Recent issues in financial reporting

PricewaterhouseCoopers (PWC) Canada has published its latest Financial Reporting Release. It discusses a new era where International Financial Reporting Standards (IFRS) — not US GAAP — dominates the Canadian financial reporting landscape. To learn more or to download the publication, visit PWC Canada.

XBRL data tags completed for US GAAP

The United States Securities and Exchange Commission has announced that XBRL data tags for the entire system of US generally accepted accounting principles has been completed. This will enable companies to more easily encode their financial statements in the XBRL language. XBRL makes the analysis and exchange of corporate financial information easier and more reliable by allowing data to be extracted and processed automatically by XBRL-aware applications. (View the SEC Press Release.)

Accounting for Sustainability

The reporting of sustainability and the embedding of that process in corporate and other organizations is becoming a significant global issue for the accountancy profession. What was once a peripheral aspect of corporate reporting is now moving into the mainstream accounting and reporting system. This is all happening at a time when the accounting profession has been moving from its traditional stance of measuring only financial figures to one that recognises “intangible” items that have just as much impact on a company's strategy and performance. The financial and economic data needs to be merged with social and environmental information to enable management to see the strategic impacts and possibilities as a whole. (View the Financial Times article "Clean reports add value" and visit The Prince's Accounting for Sustainability Project.)

Ceres Sustainability Reporting Awards 2007

The Association of Chartered Certified Accountants (ACCA) and Ceres, a US-based coalition of investors and environmental groups, has announced the sixth annual Ceres-ACCA North American Awards for Sustainability Reporting. The purpose of the awards program is to acknowledge and publicize best practice in reporting on sustainability, environmental and social performance by corporations and organizations, and to provide leadership to those companies that are publishing or intend to publish sustainability reports. In 1997, Ceres launched the Global Reporting Initiative (GRI), which has become the international standard for corporate reporting on the "triple bottom line" of economic, social and environmental performance. GRI is now an independent institution, with more than 1,200 companies using the guidelines.

Importance of the Annual Report

In a recent Annual Report Survey conducted by WithumSmith+Brown, three-out-of-four participants agreed that the annual report is the single most important publication a public company produces. The study included over one hundred individual investors, portfolio managers and securities analysts. Nearly 79% of all survey participants agreed that annual reports are an important tool in making investment decisions about companies. And, 90% of all participants agreed that annual reports should contain additional information facing the company and its industry, such as sustainability of the environment or corporate governance, and not just the company’s financial and shareholder issues. In addition, 81% of all participants prefer a printed annual report versus one in an electronic format.

Conceptual Framework—Joint Project of the IASB and FASB

The US Financial Accounting Standards Board (FASB) is redeliberating issues related to its Preliminary Views, Conceptual Framework for Financial Reporting: Objective of Financial Reporting and Qualitative Characteristics of Decision-Useful Financial Reporting Information. Specifically, it is addressing concerns raised by respondents about the role of stewardship in the objective of financial reporting and the logical flow of Chapter 1 of the Preliminary Views. The Board has decided that the “objective of general purpose external financial reporting is to provide financial information about the reporting entity that is useful to present and potential investors and creditors in making decisions in their capacity as capital providers.”

IASB issues revised standard on the presentation of financial statements

The International Accounting Standards Board (IASB) has issued a revised version of IAS 1 Presentation of Financial Statements. The revision is aimed at improving users’ ability to analyse and compare the information given in financial statements. The publication of IAS 1 marks the completion of the first phase of the IASB’s joint initiative with the US Financial Accounting Standards Board (FASB) to review and harmonise the presentation of financial statements. The second phase, which has already begun, is examining more fundamental questions about the presentation of information in financial statements and the IASB expects to publish a discussion paper on the subject within the next six months. (View the Press Release or visit the project web page.)

European simplification of financial reporting rules

The European Federation of Accountants (FEE) has published a background note on the European Commission’s Communication on Simplification of EU rules on Company Law, Accounting and Auditing. The Background Note provides a history of the current simplification efforts and a reference to FEE’s Position on EC Simplification Project.

CFA Institute promotes a new business reporting model

The CFA Institute Centre for Financial Market Integrity has published a new financial reporting model to enhance the ability of financial analysts and investors to evaluate companies in making investment decisions. The publication, A Comprehensive Business Reporting Model: Financial Reporting for Investors, was issued in July 2007. It proposes 12 principles to ensure that financial statements are relevant, clear, accurate, understandable and comprehensive.

Canadian Shareholder Profile and Attitudes

As a basis for identifying and addressing the kinds of information that various stakeholder groups want or are likely to want, it is important to consider their information sources and their objectives. In this regard, the 2004 survey on Canadian Shareowners (undertaken periodically by the TSX Group) provides some insight. The survey found that 49% of adult Canadians are shareholders, either as individuals or participants in mutual funds. A number of share ownership surveys are available on the World Federation of Exchanges website.

Statistics database on cross-border securities

Deloitte has updated its Database of Statistics which provides clear evidence of the globalization of the world’s capital markets and of the need for global financial reporting standards. The update reflects July 2007 data on the number of non-US companies listed on member exchanges of the World Federation of Exchanges and details of cross-border listings on the New York Stock Exchange, NASDAQ and the London Stock Exchange. The data includes cross-border lending and accounting standards used by companies listed on the Deutsche Börse, as well as foreign companies registered with the US Securities and Exchange Commission (SEC).

ASB reviews narrative reporting in the UK

The Accounting Standards Board (ASB) has published its first review of narrative reporting by UK listed companies. The review found that while most companies were good at describing their strategy and current performance, they were weaker on providing forward looking information and identifying their principal risks and how they are managed. As part of its role in promoting confidence in corporate reporting, the ASB will continue to be a leading contributor to any international developments on management commentary.

IASB/FASB vision of financial statement presentation

The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) are unveiling their vision of the future of financial statement presentation. Launched in 2004, the joint IASB/FASB effort first concentrated on the income statement (the presentation of income and expenses) but has now been broadened to include the complete set of financial statements. In May 2007, the two bodies posted an update on the IASB website and the FASB website detailing the progress and offering tentative examples of what financial statements might look like in the future.

SEC to streamline financial reporting

The US Securities and Exchange Commission is forming an advisory committee to study the US financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors. The SEC Advisory Committee on Improvements to Financial Reporting will study the causes of complexity and recommend how to make financial reports clearer and more beneficial to investors, reduce costs and unnecessary burdens for preparers, and better utilize advances in technology to enhance all aspects of financial reporting. The Committee is expected to issue a final report in August 2008 (view the SEC Press Release and Video Webcast).

Corporate Reporting on the Internet - Stock exchange perspective

In 2003, the Toronto Stock Exchange (TSX) updated Electronic Communications Disclosure Guidelines. The TSX strongly recommends that all listed issuers maintain a corporate web site to make investor relations information available electronically. It also maintains that disclosure by the Internet alone will not meet an issuer’s disclosure requirements and an issuer must continue to use traditional means of dissemination. The overall objective is to encourage the use of electronic media to make investor information accessible, accurate and timely. The challenge is to ensure that regulatory concerns are addressed without impeding innovation.

Corporate Reporting on the Internet - Standard-setters perspective

In 2000, the United States Financial Accounting Standards Board (FASB) issued a report on Electronic Distribution of Business Reporting Information as part of its Business Reporting Research Project (BRRP). The report examined the kind of business information corporations were reporting outside of financial statements. In 2002, the International Federation of Accountants (IFAC) issued a paper Financial Reporting on the Internet. The purpose was to stimulate discussion of issues faced by enterprises that, in addition to communicating financial information through the traditional paper medium, also choose to communicate financial information on their corporate website.

SEC mandates online proxy materials

The US Securities and Exchange Commission (SEC) has voted to make all companies post their annual meeting materials on their websites. Details won’t be known until the SEC posts the final rule but large companies will have to post their proxy materials on the web starting January 1, 2008 and smaller companies will have to comply a year later (refer to the IR Web Report).

World Federation of Exchanges supports IFRS

Responding to a consultation paper of the IOSCO Technical Committee, the World Federation of Exchanges (WFE) explained the importance of sound financial reporting to public capital markets. It reaffirmed the WFE's strong support of IFRS. The WFE is the global organisation of 54 regulated exchanges from all regions of the world that account for over 97% of world stock market capitalization.

The simple complexity of XBRL

At a recent Securities and Exchange Commission (SEC) and Financial Reporting Institute Conference in California, Robert Herz, chairman of the Financial Accounting Standards Board, said that one complication involved with implementing eXtensible Business Reporting Language (XBRL) is the difference between US accounting standards and those abroad. That means that both US GAAP and IFRS have different data "tags," which adds to the cost and confusion of using XBRL (view the full article).

IFAC global survey on financial reporting

The International Federation of Accountants (IFAC) has invited all participants in the financial reporting supply chain (including investors and other users of financial reports, standard setters, preparers, auditors, academics and regulators) to complete a global survey designed to obtain information that could strengthen the financial reporting process. The survey is open until July 6, 2007. It is part of an IFAC project to develop recommendations for improving the quality of corporate governance, financial reporting (including IFRS) and financial auditing. It will also include in-depth one-on-one interviews. Participants are asked to complete the survey online (www.ifac.org/financialreportingsurvey/).

10th Annual Global CEO Survey

PricewaterhouseCoopers has issued its 10th Annual Global CEO Survey. The survey (Figure 1.3) illustrates management’s rankings of the risks they face. Topping the list are overregulation and the availability of key skills, followed closely by low-cost competition and raw material costs. Terrorism, by contrast, is seen as a key risk by just 50% of respondents, global warming by 40% and pandemics by 37%. Interestingly, the findings of the survey offer some insight into new and innovative solutions to some of these more systemic business and macro threats. Collaboration – often linking the public and private sectors – is starting to bring some ‘macro’ risks into manageable proportions. PWC sees this as a possible solution to what traditionally might be perceived to be an Achilles’ heel in a company’s risk management solution set.

Preparing a Summary Annual Report

Regulatory and standard-setting bodies are constantly “improving” the rules to protect the interests of investors and to make sure they have good information for decision making. As a result, disclosure requirements increase and information disclosures become more complex. One way to address complexity and information overload is to prepare a summary annual report. As a start, condensed financial statements, together with an auditor’s report, could be provided. In addition, reference would be made to the organization’s website for the complete audited financial statements and the detailed management’s discussion and analysis to meet legal and regulatory requirements. For an excellent example, see PotashCorp 2006 Summary Annual Report and website disclosures using keywords.

CIRI Annual Report Survey

In 2006, Genoa Management Limited published a research report on the development practices and production costs associated with the publication of annual reports by Canadian public companies. Entitled 2005 Annual Report Survey: A study of trends and practices in the annual report process, the report was made possible by the support of the Canadian Investor Relations Institute (CIRI) and the sponsorship of CCNMatthews. The research report is the first comprehensive study published following changes adopted in April 2004 by Canadian securities regulators that allowed public companies to ask their shareholders if they wanted to receive a printed copy of the company’s annual report.

Maintaining Quality Capital Markets Through Quality Information

The Capital Markets Leadership Task Force (CMLTF) comprises a common interest group of stakeholders administered by the Canadian Institute of Chartered Accountants (CICA). The CMLTF commissioned a Discussion Paper on "Maintaining Quality Capital Markets Through Quality Information." The Paper portrays the current environment and proposes ideas for enhancing financial information in Canada’s capital markets.

Capital Markets and Sustainability

Following consultations with 200 representatives from the private and public sector across Canada, the National Round Table on the Environment and the Economy (NRTEE) issued its report on Capital Markets and Sustainability in February 2007. The government appointed body concluded that, by linking sustainability factors with investment decisions, capital markets are key to addressing environmental issues such as climate change and ensuring Canada’s long-term economic competitiveness. Given recent polls showing the environment rising to the top of the public agenda, the report’s recommendations about how to overcome barriers to integrating environmental, social and governance factors in investment decisions, is particularly timely.

Corporate reporting... rethought

The Report Leadership Group in the UK aims to challenge established thinking on corporate reporting. The contributors to the initiative are the Chartered Institute of Management Accountants (CIMA), PricewaterhouseCoopers LLP, Radley Yeldar and Tomkins plc. The Group believes that corporate reporting should be more relevant, informative and accessible. It should provide investors with what they want without inundating them with unnecessary detail. In its view, this means understanding that corporate reporting goes well beyond issues of measurement and accounting. The Report Leadership website includes a press release, background information and downloads of the main documents launched by the Group on November 21, 2006.

Meeting investor needs in an evolving global market

In November 2006, the Global Public Policy Symposium released a paper entitled Global Capital Markets and the Global Economy: A Vision from the CEOs of the International Audit Networks. The symposium was sponsored by the six largest accounting firm networks — PwC, KPMG, Deloitte, E&Y, BDO and Grant Thornton. The paper looks at what changes are required in global financial reporting and public company auditing to better serve global capital markets and is designed to be the beginning of a dialogue with all stakeholders on these issues.

FEI addresses financial reporting complexity

The Financial Executives International (FEI) notes that the complexity and technical demands of accounting and disclosure standards have increased considerably in recent years. It believes complexity harms the ability of users of financial statements to understand the information provided and impairs the ability of preparers to explain their financial results in a meaningful way. Investors are not well served by the drain on shareholder wealth from the excessively complex compliance process. The capital markets are not well served when scarce financial resources are not used in value-enhancing business initiatives but to satisfy disclosure and accounting requirements that fail to meet cost-benefit tests. The FEI’s Four Point Plan recommends steps to address complexity, including a call for all stakeholders in the financial reporting process to come together to form an independent “Committee on Complexity.”

Keep it simple...

IASB Chairman Sir David Tweedie recently delivered the 2007 Ken Spencer Memorial Lecture at the University of Melbourne, Australia. The title of the paper is: “Keep it simple, stupid! Can global standards be principle-based?” In his opinion, a good principles-based standard must pass four tests: (1) Is the standard written in plain English? (2) Can the standard be explained simply in a matter of a minute or so? (3) Does it make intuitive sense? (4) Does management believe it helps them to understand and describe the underlying economic activity? The lecture is also available as an MP3 audio presentation or slides.

CICA Corporate Reporting Awards

The CICA Corporate Reporting Awards provide a forum to showcase the efforts of those responsible for excellence in corporate reporting. This prestigious awards program honours the best corporate reporting models in Canada. The top 50 companies per industry sector listed on the TSX with a market cap of over $200 million and incorporated in Canada are eligible to participate. Awards are given to companies who receive the highest average scores in four judging categories: financial reporting, corporate governance disclosure, electronic disclosure and sustainable development reporting (if applicable to the industry).

Electronic disclosures and web-based reporting

With the rapid advancement of information technology, particularly the Internet and related technologies such as XBRL (eXtensible Business Reporting Language), organizations are adopting new means of communicating with investors and other stakeholders. For example, information is being delivered online in the form of corporate news, quarterly earnings releases, annual reports (typically in PDF format), audio and/or video conferencing and e-mail alerts. Together, organizations and stakeholders are shifting to a new paradigm — real-time online reporting. A new CICA research study addresses “corporate reporting to stakeholders” on a continuous basis, including online reporting. It is anticipated that the study will be available in September 2007. However, a Highlights booklet is available now (Corporate Reporting to Stakeholders - Highlights).

About this BLOG

This BLOG provides a focal point for disseminating research and guidance materials that enhance communications between an organization and its various stakeholder groups. The emphasis is on financial information, such as performance reporting, and non-financial information, such as corporate social responsibilities. The information may be conveyed through various means, for example, paper-based annual reports and Internet-based communications, such as websites.