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Financial reports have become complex and difficult to read. Companies struggle to tell the story of their performance to the market, and important information gets lost in a sea of boilerplate and immaterial information. The number and detail of disclosures required by accounting standards has increased significantly and a risk-averse mindset has led preparers, auditors and regulators to take a 'belt and braces' approach to disclosure, further increasing the volume of information. The result is that financial reports are now more about compliance than about communication.
In a competitive market for capital, communication matters. Research has shown that companies that communicate their strategy and performance credibly and effectively find it easier to access capital. Revising the accounting standards framework to address the issue of complexity in financial statements will take time. We wanted to explore what you can do right now, within the existing framework to streamline your financial statements.
In the 2015 reporting season we have seen a number of NZ's largest listed companies streamlining their financial statements and in the process producing a useful document that really helps investors to understand the company's performance. This publication outlines some of the trends we have observed in the 2015 Annual Reports of the NZX 50.
We’re already seeing a number of companies in New Zealand streamline their reporting. In our video, 'Bringing streamlining to life', Lyn Hunt talks to the CEO of the Financial Markets Authority (FMA), Rob Everett, independent directors, Sue Sheldon and Joanna Perry, and the Financial Controller of Chorus, Sharyn Mitchell, about their experiences and insights on streamlining.
We've created a Streamlined Annual Financial Report to demonstrate some simple ideas that companies could apply to make their reports less complex and more accessible. It also highlights areas where the existing accounting regime prevents companies from taking what could be a more effective approach.
It’s time for all stakeholders in the financial reporting supply chain, whether standard setters, preparers - both management and boards - auditors or regulators, to be brave and experiment with improving financial reporting so it remains useful, transparent and relevant to users.
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