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).