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The KPMG Survey of Business Reporting

The KPMG Survey of Business Reporting

The KPMG Survey of Business Reporting examines 90 companies’ reports from around the world to question whether the historical focus of today’s annual reports is driving short term decision making by both investors and company management. It reveals evidence of a disconnect between the key drivers of business value and the content of reports.

Michael Bray

KPMG Fellow of Integrated Reporting, Deakin University and Director, Better Business Reporting

KPMG Australia


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Many management teams are frustrated at the perceived short term focus of investors. On the other hand, it is also true that many investment managers are frustrated by the perception that management is too focused on driving value in the short term and are aware that company management can exchange long term business prospects for short term earnings performance.

A key reason for this situation is that the focus of communication between managers and owners is principally on historical earnings performance. The extent of shareholder value creation is rarely visible in an annual report. As a result, investors have limited objective information with which to assess whether the longer term, value creating prospects of the business have been truly enhanced. The historical financial statements will tell you whether revenues are growing but they won’t necessarily tell you whether the customer base is getting stronger.

Said another way, the financials may tell you how much money the company made, but not necessarily how the company makes money. And more importantly, whether the current year earnings provide a long term sustainable proposition for value creation. Against this background, it is time to ask whether the historical focus of today’s annual reports is driving short term decision making, resulting in a bias against investment in longer term prospects.

In many parts of the world, investor presentations have developed as a means of providing a broader picture of performance. They can be more timely as they are not tied to the annual reporting cycle, but they still have a tendency to prioritise short term earnings over long term value. Businesses investing in the long term have an interest in moving their investor dialogue beyond this narrow picture. Good narrative reporting providing quantitative and qualitative information should give investors more confidence in the reliability and completeness of the picture presented in other more timely communications. 

Delivering a more relevant report

There have been a number of reporting initiatives in the wake of the global financial crisis aimed at finessing existing areas of financial reporting. There is no doubt that the quality of financial information is essential for effective investor decision making but we believe that a broader debate is required. It’s time to step back from the detail and ask whether the current balance and focus of reporting is right for capital markets’ needs.

We tested the premise that fundamental reforms to reporting are needed by interviewing 10 international leaders in the field in “The future of corporate reporting: towards a common vision (2013).” All agreed on the need for change, but they did not concur on how far-reaching the reforms had to be or what should be altered.

This survey has been undertaken to provide a basis from which to support this debate, to invite comparison over where reporting stands now, against what it needs to deliver in order to support the efficient functioning of the capital markets. 

About the survey

This survey has looked at the reports of some 90 companies across ten countries over a five year period. The definition of an ‘Annual Report’ varies across regulatory environments. The survey looks at the primary reporting document used in each country (for example, the ‘10-K’ in the USA) and refer to this as the ‘annual report’ throughout.

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