We recently touched on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers, seeking “comments on potential options for reducing regulatory burden for non-investment fund reporting issuers in the public markets.”

I noted before that the very choice of the term “reducing regulatory burden” suggests a predisposition to find burdensome things that can be reduced. We shouldn’t overlook though that there also exists a significant body of interest (albeit more prominently outside Canada) in enhancing the disclosures made by reporting issuers – see for example the momentum behind integrated reporting, or such initiatives as the Task Force on Climate-Related Financial Disclosures. Of course, that kind of advocacy focuses on large, “established” entities rather than small, developing ones, which makes perfect sense: the information that’s useful in evaluating the continuation of an existing income stream is different from what’s needed in assessing whether such an income stream can even be created.

A useful reference point in this regard might come from the Federation of European Accountants and its 2015 document The Future of Corporate Reporting – creating the dynamics for change. The foreword to the document summarizes some of the perceived reasons for such change.

• We are convinced that, in particular, the growing difference between the market capitalization and net asset value of leading global corporates represents a key rationale for review, enhancement and change of the existing corporate reporting model, so as to capture comprehensively the true value drivers of current businesses.
• Technology has always been instrumental in shaping society and markets. However today it transforms the environment in which we operate, live and think in a way and at a pace that are both unprecedented. New business models are emerging, existing ones are disrupted, and yet corporate reporting does not seem to be keeping up with these developments.

The document’s central proposal is a “CORE & MORE” approach to financial reporting (I must confess to finding the phrase “CORE & MORE” a little silly-sounding, especially give the all-caps approach to it, but maybe that’s just me). Here’s a synopsis:

• The proposal involves an overarching report or executive summary – the CORE report – in which a company includes the key information that is important for obtaining a fair understanding of the key elements of the company’s affairs, the key financial results, and the additional information that is considered to be relevant and material for the company’s stakeholders. Some examples of the latter could be information about the company’s objectives, strategy and business model, information about the past and expectations about the future, and risk and risk mitigation processes. It is imperative that a company selects the content of the CORE report based on relevance and materiality since it serves as the executive summary for the detailed information included in the MORE reports that follow. While some standardization of the content of the CORE report would enhance comparability, a certain level of flexibility for companies is preferable so that they are able to define the content of the report based on their own business objectives and models, and based on their analysis of their key stakeholders’ needs.
• The CORE report would be accompanied by additional layer(s), the MORE reports, which include detailed information, for example detailed disclosures for financial statements that can support the information which is included in the CORE report. MORE reports could include a wide range of information that may be part of the CORE report. The purpose of having additional layer(s) is to enable the reporting of detailed information that stakeholders may be interested in, depending on their information needs.
• The enhanced use of technology would facilitate the presentation of the CORE & MORE reports. Presenting the CORE report with (hyper)links to the MORE layers would allow readers to click on those parts that they are interested in and access the level of detail that they need to fulfil their information needs.

The FEE recently issued a follow-up paper, setting out its intention to, among other things, “provide more clarity around, and fine-tune, the CORE & MORE concept and how integrated reporting and CORE & MORE relate to each other,” and to “further research the various impacts of technology on corporate reporting, including online reporting and social media, both from the perspective of the reporting entity and the users of corporate reporting.” One of the main next steps will be “an event” to be hosted in the “second half of 2017.”

Of course, the FEE research can allow itself a happy amount of “blue sky thinking,” whereas the CSA is constrained by the inertia of existing requirements and infrastructure.  But at the very least, there’s surely a useful reference point here. One could imagine, for instance, some kind of Canadian requirement for a “CORE” presentation of carefully summarized financial information, with the full IFRS-compliant financial statements included among the “MORE.” Other aspects of the “MORE” requirements might differ among entities, to reflect differences in size, complexity, state of development and so forth. But do regulators have the appetite for more than incremental subtraction from the current regime…?

The opinions expressed are solely those of the author