Performance statement: Coming together to shape the future offers important insights into the adequacy of corporate communication with the capital market, with pragmatic suggestions for areas where better reporting could increase investor's confidence in management’s performance.
Communicating financial performance has been a core ambition of reporting standards since their inception. In this survey of both investment professionals and corporate management, we compare and contrast their perceptions of the information needed to communicate financial performance and offer insights into where the gaps in current reporting practice lie.
- Is GAAP meeting the needs of companies and investors?
- What can management do to mitigate current information shortfalls within the existing reporting framework?
- Is the proposed direction of travel of the standard setters likely to result in a performance statement that better meets user needs?
Our survey found that the investment community and corporate respondents agreed on most issues:
- Investors and management both rank the income statement as the most important of the primary statements, offering the best insight into company performance
- Both groups stress the need to distinguish ‘underlying’ earnings from both one-off events (such as a gain from the sale of a business) and the impact of the re-measurement of assets or liabilities.
- They believe that the earnings number is useful and largely agree upon how that number should be defined.
- Non GAAP is valued by the most respondents, may want ground rules to govern their use.
- The only key areas of divergence lie in tax reporting and how segments should be identified.