Financial reports must be made more relevant to investors: PricewaterhouseCoopers

Companies in the financial sector need to provide more narrative information in their financial reporting, according to a new survey by PricewaterhouseCoopers (PwC).PwC recently published the results of its new survey on the reporting practices of the worlds largest companiesthe Fortune Global 500 (G500). The survey, called Corporate reporting a time for reflection, includes G500 businesses headquartered in Canada, the United States, Japan, Europe, Australia and many developing economies.Companies provide some narrative information in their reports, but the top G500 reporters provide a great deal more, says Rick Snidal a partner at PwC. Our research tells us that in addition to the financial details, the investor community wants the company to communicate its performance and prospects in straightforward language. Corporate reports are the primary medium for companies to communicate with investors and from the investor communitys perspective, there is plenty of room for improvement.The survey found two-thirds of the G500 demonstrate consistency between their narrative and financial reporting on their business segments. Sixty per cent offer performance highlights, the report notes. On the other hand, only 15% report specific key performance indicators of the kind that management routinely uses to operate the business. And, just 10% of narrative reporting that includes quantitative information is forward-looking.The survey findings do not mean companies should be focussing on creating larger, more expensive reports, PwC says. Companies should balance the effort and cost of adhering to regulatory requirements and focus on relevance over volume, according to PwC. Communicating how management intends to create value, providing high-level targets and goals, specifically defining their key performance indicators these are some of the ideas companies need to consider to provide investors with enough information to assess company performance, and to reduce the likelihood that investors will assess the company with external information.Additional survey results show that for critical disclosures and accessibility: 30% of companies provide some form of revenue or operating profit bridge reconciling year-on-year performance. 67% of companies report segmented information in financial statements on both a business unit and a geographic basis 71% of companies report segment information solely on a business unit basis in their narrative reporting.