- As the demand for more information grows, so too does the need for that information to be standardised, consistent and comparable.
- Financial and non-financial information need to be prepared for a common purpose, which necessitates the adoption of a common objective.
- The provision of information digitally is already occurring, and such an approach could be built upon for corporate reporting more broadly.
The need to extend corporate reporting is undeniable, but how should this be accommodated without further escalating complexity? This is the question explored in a new report from Chartered Accountants ANZ and Professor Peter Wells.
The report explores the evolution of financial and broader corporate reporting and the effect this has had on the complexity and understandability of financial reports. It also looks at potential solutions to address these challenges. Digital reporting and Extended External Reporting (EER) are not new concepts, and both feature strongly as strategies to ensure that corporate reports meet the diverse needs of users.
Accountants are well placed to be involved in this expansion and evolution of corporate reporting due to their experience in standard setting, and the preparation and assurance of corporate reports. This experience brings an understanding of the need for standardised, consistent, and reliable information critical for decision making.
Here is an overview of the key sections of the report:
- Complexity in financial reporting identifies several challenges in financial reporting: business operations and transactions becoming more complex with accounting standards following suit; an increasing demand for financial information and financial reports increasing in volume; an increasing demand for non-financial information resulting in multiple disparate corporate reports; and the limitations in human cognitive ability.
- Further complexity in financial reporting ahead looks at the expansion of corporate reporting and canvasses whether the current ad hoc approach to such expansion is sufficient for users' needs, or whether a broader framework provides information for decision making is necessary. It also compares the empirical research around voluntary and mandatory reporting.
- Overcoming complexity: Digital financial reporting recognises the potential of digital reporting to enhance the ability of users to access the information in corporate reports effectively and efficiently. It provides an overview of what digital financial reporting involves, and the issues requiring redress if digital reporting is to be expanded to corporate reporting more broadly. It also looks at international experiences that provide important insights relevant to the adoption of digital financial reporting, and digital reporting more generally.