ICAS symposium at the EAA Congress

MAASTRICHT
By Michelle Crickett, ICAS Director of Research

18 May 2016

The ICAS symposium at the European Accounting Association (EAA) Congress starts a constructive debate on what is performance, reports Michelle Crickett.

ICAS held a symposium at the EAA Congress in Maastricht on 12 May.  The session was an opportunity to launch the new ICAS discussion paper and call for research entitled What is performance? and to gather views from some high profile speakers and the audience on the notion of ‘performance’ and how it should be reported.  This article provides a brief summary of the session.

Professor Stefano Zambon, University of Ferrara and ICAS Research Committee chaired the session, introducing the topic by referring to the US research which highlights that financial numbers may have lost their relevance.   The audience was then asked for their views on this issue: How broken do you think the current financial reporting model is?  The response was as follows: it is not broken at all (27%); it is broken beyond repair (13%); and it is broken, but it is salvageable (60%).

Hilary Eastman, Director, Head of Global Investor Engagement, PwC and ICAS Research Committee and member of the ICAS working group who prepared the paper presented the rationale and major contents of the paper.

Hilary referred to the need to look at different users’ information needs – where are the overlaps and where are the differences. Investors are interested in the non-financial information where it is likely to have a financial impact.

Hilary also drew attention to some of the key questions in the paper – including the differences between management and external views on performance, the challenge of multiple non-financial reporting initiatives and whether there is a demand for assurance on wider performance measures or a risk that assurance could stifle innovation.

Hugh Shields, Executive Technical Director, IASB then discussed performance and the Conceptual Framework; Alternative Performance Measures; and the IASB’s involvement in wider corporate reporting developments. There has been a strong message from the responses on the agenda consultation that the IASB needs to address performance and this is likely to be a major project going forward.

The board will also issue a discussion paper later this year on the disclosure initiative which will address alternative performance measures (APMs) and the need for such measures to be fairly presented.

Deepa Raval, Project Director, Accounting and Reporting Policy Team, UK Financial Reporting Council presented the initiatives currently taking place in the UK. Deepa emphasised that reporting is evolving it is about telling a company’s story rather than just the numbers.

Deepa referred to the large number of initiatives that are taking place on financial reporting (over 500 frameworks) and the resultant issues for preparers and the implications for cutting clutter from the annual report. There is a need to consider what the best communication channels are for information and make use of technology.

Peter Malmqvist, Chief Equity Analyst, Remium Nordic and Chairman, The Swedish Society of Financial Analysts, presented a user voice.  Peter commented that reporting has improved over the last 30 years, and the IASB had to be thanked in part for this.  But business has changed, for example the use of financial instruments and different business models have made it hard to understand revenue.

The major problem analysts face are non-recurring items and this is more of an issue in a period of downturn and is generally always recognised in the final quarter.  Peter called for better quarterly financial information.

The symposium ended with further polling of the audience – the results of which are reported below:

Do we need to have different reporting frameworks to meet the needs of different stakeholder groups?

  • Yes - 41%
  • No – 59%

Should different communication channels be used to meet the needs of different stakeholder groups?

  • Yes – 80%
  • No – 20%

Would a 'through the eyes of management' approach work for reporting performance?

  • Yes – 14%
  • Yes, but only if audited – 45%
  • No – 41%

Would you be in favour of sector-orientated performance reporting?

  • Yes – 30%
  • Yes, but only for some sectors – 23%
  • No – 47%

The audience was encouraged to respond to the discussion paper and apply for ICAS funding to undertake research in the area of performance. For further information, please contact research@icas.com.

Image credit: pavel dudek / Shutterstock.com

Topics

  • Research

Previous Page