FAQs

1. Why did you focus on the annual report?
2. Will your ideas mean we have to disclose more?
3. Why didn’t you report on the value of the company in the eyes of management?
4. Why didn’t you call the analysis of net debt a ‘Statement of Debt’?
5. Isn’t there enough segmental breakdown in most major corporate reports?
6. Don’t we provide enough information on pensions already?
7. Why is ‘navigation’ so important to good corporate reporting?
8. Aren’t you just encouraging us to give away key information to the competition?
9. Don’t we all report on strategy already?
10. Isn’t it dangerous to talk about the future too much in corporate reporting?
11. Have you included profit forecasts in your fictitious annual report?
12. How can we get involved in the project?
13. Isn’t the use of non-GAAP measures discouraged?
14. Don’t a lot of companies already do what you are suggesting?
15. Why did you focus on investors?

1: Why did you focus on the annual report?

A: It’s easy to knock existing models, but more useful to propose alternatives. Our ideas are applicable to the whole field of corporate reporting. But to show how they might play out in practice we’ve applied them to the delivery vehicle that’s most familiar – the annual report. For most companies, the annual report remains the primary document of record. Yet, sadly, few investors pay it much attention. We hope that our fictitious report for Generico will provide some ideas that companies can incorporate into their own corporate reporting.

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2: Will your ideas mean we have to disclose more?

A: There is always pressure from investors and analysts for additional disclosure. Sheer weight of information remains a problem, however additional disclosure needn’t mean bulkier reports – if you can also leave out what investors don’t need. Our ideas are meant to satisfy some of the demands from the financial community. But they should not automatically lead to the need to disclose additional information, as a large portion of the information featured in Generico's annual report is often currently reported outside the regulatory reporting model. Certainly, we believe there is scope for greater use of company websites to provide supporting detail – and downloadable figures. Much of the information provided in our report lends itself to this medium.

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3: Why didn’t you report on the value of the company in the eyes of management?

A: We proposed such a section but investors said that we should not go down that route. They pointed out that placing a value on companies was their job. It is up to management to provide high quality information so that investors can come to their own conclusions.

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4: Why didn’t you call the analysis of net debt a ‘Statement of Debt’?

A: We wanted to, but as net debt information does not currently feature as part of any primary statement we were unable to create a new one. We believe that companies should include a ‘Statement of Debt’ or equivalent in their reporting. It’s useful. Investors want it. We certainly think it is something that standard setters might like to consider.

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5: Isn’t there enough segmental breakdown in most major corporate reports?

A: Some companies do provide decent levels of segmental breakdown already – but we think most should do more. In many cases, it is simple things, such as consistency between definition of the segments throughout a report, or splitting out head office costs instead of allocating them across segments. In general, investors want greater granularity on segmental disclosure.

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6: Don’t we provide enough information on pensions already?

A: Unfortunately, not. The emergence of major pension deficits in recent years means that investors have woken up to this area as being a potential black hole. The result? They want more information. Our proposals include a sensitivity analysis covering the major assumptions behind a scheme’s liabilities and explaining many of the major pension issues in more accessible formats, such as graphics.

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7: Why is ‘navigation’ so important to good corporate reporting?

A: Because if you cannot find the information there is little point in producing it. Much as companies might like the idea that everyone reads everything in their annual reports, they don’t. In fact, the vast majority just skim read for key facts. Good navigational aids help readers find information quickly. Tabbing, contents, indexes, headers, footers are not rocket science – but you would be amazed at how many companies leave them out. Even just putting the name of the company and year of report on every page would help.

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8: Aren’t you just encouraging us to give away key information to the competition?

A: No. We recognise corporate sensitivities and the last thing your investors want you to do is weaken your business by giving away commercial secrets. Most companies can, however, indicate ranges and key drivers behind their businesses without giving away commercially sensitive information. It’s this sort of information – the strategic priorities and non-financial drivers – behind the business that we would like to see more of in corporate reporting.

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9: Don’t we all report on strategy already?

A: Many companies have improved their level of strategic reporting in recent years. But few do it well. Several simply state their strategy up front and then fail to provide a clear link to any of the other information reported. We would like companies to show how their strategy is integrated into the whole of their business. Why are you following this strategy? What does it mean in practice? What are the external pressures on that strategy? How do you measure strategic success? And so on.

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10: Isn’t it dangerous to talk about the future too much in corporate reporting?

A: Directors often say that they cannot talk about the future for fear of ‘putting their necks on the block’ in terms of potential litigation. We recognise those fears. But we also recognise that investors want some indication about future trends – they want to know about the direction in which your company is travelling and its aspirations. Our argument is that you can give that information without necessarily putting directors’ necks on the block – it is about discussing the potential threats and opportunities in your markets, providing clarity around strategic priorities, outlining broad ranges for non-financial KPIs going forward and, generally, talking about the future as the directors see it. It does not however mean, for example, having to provide profit forecasts.

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11: Have you included profit forecasts in your fictitious annual report?

A: No. As indicated above, in general, we have provided information about the direction of travel for future years, rather than specifics. In any event, we have not provided sufficient targets around the other components of ‘profit’ (such as tax and interest costs, etc) in order to calculate a profit forecast.

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12: How can we get involved in the project?

A: The Report Leadership group welcomes external input. Again, please contact us using the form on this website or via info@reportleadership.com

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13: Isn’t the use of non-GAAP measures discouraged?

A: Whilst the SEC prohibit the use of non-GAAP measures in the body of the financial statements they are permissible under IFRS. Non-GAAP measures are, and have been, an accepted part of financial reporting for some time – as long as they adhere to some basic principles of disclosure. They should not be given undue prominence. They should also be: explained; backed up with definitions; calculated consistently over time; reconciled to GAAP measures; and include comparatives. Clearly, given their importance in both management and investor decision-making we believe the time is right to encourage further debate amongst stakeholders on the disclosure of non-GAAP measures.

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14: Don’t a lot of companies already do what you are suggesting?

A: Yes, some companies have already grasped some of the ideas and thinking behind Report Leadership, although no company has yet incorporated all of these suggestions. We do not pretend to be light years ahead of best practice – the whole idea of the project was to produce solutions that companies could incorporate today, within current GAAP or IFRS models. What we have done is put down on paper some simple ideas that can change reporting for, we think, the better. And those changes can be made now.

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