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KPMG International had examined 90 companies’ reports from around the world in the ‘KPMG Survey of Business Reporting’. The survey questions whether the historical focus of today’s annual reports is driving short term decision making by both investors and company management.
It also reveals disconnect between the key drivers of business value and the content of reports.
For example, while over half of audit committees consider customer focus to be one of their top three drivers of business value, only 7 per cent of reports surveyed provided performance data on customer focus or satisfaction.
Besides, 85 per cent of reports surveyed did not identify brand and reputation as a key risk while 21 per cent of them did not provide any operating performance measures.
According to KPMG, reports need to take a longer term view and provide a broader perspective to help investors take their assessments beyond current year earnings.
“Management teams are telling KPMG member firms that they are frustrated by apparent investor short-termism. I believe that better business reporting could provide investors with the objective information they need to take a longer term view,” said Larry Bradley, global head of Audit at KPMG International.
KPMG International has made four suggestions to help reports align more closely with investor decision making, including aligning performance measures with the drivers of shareholder value; recognising that operating performance measures can provide leading indicators of business prospects in areas that historic financial metrics cannot; joining up reporting content and refocusing reporting culture.
Matt Chapman, KPMG in the UK’s Better Business Reporting leader, and author of the survey, concluded: “Businesses that are investing in their long term future should have a strong incentive to make this investment more visible. We need to recognise that the financials are only the start of the story, and better align performance measures with the drivers of shareholder value to support this.”
KPMG, a global network of professional audit, tax and advisory services firms, operates in over 155 countries with more than 155,000 professionals around the world.