The Corporate Reporting Dialogue – a major rebalancing?

I somehow stumbled onto the website of the “Corporate Reporting Dialogue,” “an initiative designed to respond to market calls for greater coherence, consistency and comparability between corporate reporting frameworks, standards and related requirements.”

It was spawned under the umbrella of the broad Integrated Reporting initiative, which seeks to work toward “a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.”

On the home page of the Corporate Reporting Dialogue, the project Chair says this:

  • “The corporate reporting landscape is changing. For too long, reporting has been fragmented and disconnected from the strategic drivers of value. The Corporate Reporting Dialogue represents the coming together of organizations that have the combined power to shape the future corporate reporting landscape, creating a cohesive, meaningful and durable roadmap that builds business and investor confidence.  It is a collaboration that will promote greater cohesion and efficiency, rebalancing reporting in favour of the reader, helping to re-establish the connection between a business and its principal stakeholders.”

Collaborators include the IASB, FASB, and various organizations involved in environmental, sustainability, or social responsibility reporting. The website seeks to set out how the publications of each group relate, or don’t, to six key categories of capital (financial, manufactured, intellectual, human, social and responsibility, natural) and how their content is relevant, or isn’t, to reporting on organizational overview and external environment, governance, the business model, risks and opportunities, strategy and resource allocation, performance and outlook. Some of what it comes up with seems like a real stretch: for instance, IFRS is considered to provide some information on human capital by virtue of IAS 19, IAS 26 and IFRS 2, but it’s hard to see how a bunch of highly technical disclosures on the accumulated cost of benefits and awards helps anyone to assess “people’s competencies, capabilities and experience, and their motivations to innovate.” Likewise, it’s hard to see why IFRS 11, Joint Arrangements, is held out as being of particular value in assessing “intellectual capital.” And so on.

The quotation above is obviously quite ambitious in its scope, seemingly promising a potential breakthrough to a higher level of communication coherence and effectiveness. After trying for a while to absorb the material, I must admit I’m unsure whether it truly does anything to achieve this, or whether it’s fundamentally just a mapping and cataloguing exercise. It’s interesting enough to have a source that provides a super-high-level summary of the scope of, say, Sustainability Accounting Standards, but there’s not much you can actually do with that. It seems that this kind of navigational tool could only be useful if, in its absence, the reporting landscape would be so fragmented and chaotic that even an engaged user would have little chance of identifying all the sources that might be relevant to any attempt to evolve toward more effective corporate reporting. But maybe that’s indeed the case.

It’s a bit ironic, if that’s the right word for it, that while the broad integrated reporting initiative sets its sights so ambitiously high, the current reality of the prevailing requirements is often in large part an outdated, irrational mess. If one were designing a system from scratch, would it contemplate seven (at least) organizations issuing guidance on related aspects of the same thing? And it’s more than a little bizarre that the IASB’s recent online survey of investors and analysts to better understand their priorities with respect to financial reporting feels obliged to ask “Do you think that current or future developments in technology could impact the relevance of IFRS?,” with the option of simply clicking on “No.” Is there any worthwhile field of value-adding knowledge-based activity in which one could straight-facedly assert that developments in technology (even the ones we don’t know about yet) might not be relevant? And yet, this only reflects the reality that the whole infrastructure’s lasted this long by pretending to live in a much more primitive world than the one we occupy – one for example where people are happy to receive supposedly decision-critical information at largely fixed intervals, in an engagement-resistant linear form, months after the events to which they relate. For another kind of example, Canadian regulatory requirements still insist that “material” information be packaged into different documents of overlapping purpose (MD&A, AIF, information circular), limiting the ability to streamline and to reduce duplication by cross-referencing. Is it any wonder that such pervasive doubt exists about the utility of such systems?

Given how we like to muse on the complexity of the age we’re living in, the essentially simple service provided by the Corporate Reporting Dialogue should have been taken care of years ago. The fact that it wasn’t, and that there’s still some potential value to the exercise, says a lot about how our achievements in this area fall short of our high-flying claims. Including, unfortunately, the high-flying claim that this can do much in itself to build business and investor confidence and to rebalance reporting in favour of the reader…

The opinions expressed are solely those of the author

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