A Vision for the Future of Corporate Reporting (Part 5): Multi-Report Models
Part of the crux of the issues related to the future of corporate reporting is the nature of a “report.” Is a report something that through conventions makes browsing the information simpler and comparing two reports (either across organizations or across periods) simpler? Does breaking information into multiple interconnected reports, like a web site that gets you started and points you elsewhere as necessary, make more sense? Can the information be abstracted but standardized sufficiently for people to create their own reports that better reflect their own demands and circumstances?
We are continuing a series of blog entries specifically about the FRC’s (UK’s Financial Reporting Council) A Matter of Principles: The Future of Corporate Reporting, a discussion paper published in October 2020 with comments requested by February 5, 2021. In this entry, we are focusing on two related sentences within the principle-based document:
There is a clear view that the annual report is trying to achieve too much.
We continue to hear that the annual report is too long and impenetrable.
The paper recognizes that, “annual paper-based reporting struggles to meet a growing need for flexibility, immediacy and personalisation.” As an alternative, it proposes a “network” of interrelated reports, focusing on three base reports:
1. The Business Report, a concise, stakeholder-neutral report with both financial and non-financial information.
2. The full financial statements.
3. A Public Interest Report, for non-financial reporting information.
The paper notes that the composition of the network of reports may look very different in the future.
With an XBRL eye to the situation, the question might be raised: is allocating information across multiple reports helpful, as you are not presenting everything in one report. Or does it complicate matters even more, as information will have to be redundantly presented and it may be difficult to find information across more documents, where a greater effort will be necessary to keep them synchronized as the inevitable changes occur?
Does it make more sense to – as XBRL began – provide one set of data that can easily be sorted, filtered and presented in a fashion most appropriate to the data consumer? And looking back to Events Theory and George H. Sorter, is the nature of a standardized report a problem in itself? Management still has to make estimates and chose valuations, and consider levels of aggregation that management feels is important to a singular group of stakeholders. If the underlying supporting details can be made public and systems put in place to facilitate valuations and estimates and aggregations, as well as summarizations and presentations, then there will truly be flexibility, immediacy and personalization.
Do the future or reporting depend on a report … or on standardizing the underlying details, the mappings, the rules, and permitting management to assemble it for various audiences, while letting other audiences do the assembly themselves?
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