Corporate reporting must evolve to stay relevant, says Deloitte's new report
Role of the accounting profession and auditors is examined as change agents in providing investment stakeholders more value
Toronto, June 8, 2017 – The current corporate reporting framework, established decades ago, is no longer the only appropriate tool for investors to measure company performance. Today, the market desires more relevant and indicative information about corporate performance which has led to an increase in new metrics that fall outside the codified rules of Generally Accepted Accounting Principles (GAAP). In Raising the game, the latest report in its Is more less? Exploring a new world of corporate reporting series, Deloitte argues that corporate reporting standards need to evolve and the accounting profession and auditors are imperative to facilitating this much needed change.
“We’ve heard countless times that the current reporting model, including the disclosures it prescribes, is no longer fit for purpose,” said Al Donald, a senior Audit and Assurance partner at Deloitte in Canada. “For businesses to tell their performance stories effectively, they need metrics that go past the GAAP framework, especially as fewer and fewer stakeholders are depending on them as their primary source of investment information.”
Today’s stakeholders and analysts want information that better reveals current and future performance than what is prescribed by GAAP, and in reacting to the demand, companies create new metrics. This additional information, not prepared in accordance with codified standards, can have the biggest impact on the market, and often the brand and reputation of a company.
“The audit profession has the skills to provide assurance on much of the information investors find valuable, not what tradition deems valuable,” said Stacey Nagle, an Audit and Assurance partner at Deloitte in Canada. “While auditors should not overstep the natural boundaries of their professional standards, nor be expected to do so, undertaking an expanded role can be extremely beneficial to companies and their stakeholders.”
The report outlines key ways accountants and auditors can be agents of change in support of an enhanced reporting framework:
- Work more closely with preparers, industries, and regulators to help identify critical value-driving indicators, define the criteria for measurement, standardize those measurements, and, finally, provide assurance on them;
- Work with organizations on their control processes and procedures to help ensure the reliable production of information of most value to stakeholders, so that information shared with the investing public could have greater assurance;
- Partner with regulators to establish a framework that will better meet the needs of twenty-first-century stakeholders and investors, and;
- Advocate for taking a long-term vision, which would be reflected in a corporate reporting model that features more forward-looking measures, more frequent releases of key pieces of data, and more comprehensive analysis released less frequently.
“Accountants and auditors have a critical role to play in changing the current reporting framework but to make meaningful changes will require deep involvement from regulators,” Donald continued. “Any new corporate reporting framework must be flexible and scalable. In an era in which emerging trends and technologies can have deep and far-reaching repercussions for organizations, how we measure the success of company will continue to evolve.”
Raising the game is the fourth part of a series that explores how to modernize corporate reporting. The findings from the series were identified from Deloitte’s journey over the number of years interviewing and hosting panel discussions with directors from Canadian public company boards, and other capital markets participants from across Canada in order to gain ideas and insights on the current state of corporate reporting.
Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited.
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