The Financial Reporting Lab Business model reporting initial
The Financial Reporting Lab Business model reporting – initial findings Carl Renner, Lab Project Director 8 July 2016
2 Lab Purpose § Launched in Oct 2011 with a clear vision: “To promote market innovation in corporate reporting through publication of influential evidence-based research, presenting practical and pragmatic solutions developed with companies and the investment community, addressing their issues. ” § The following distinguishes its activities: • Providing a safe environment for companies and investors to work on disclosure issues that they want to improve. • Taking a collaborative approach so that reporting better meets the needs of companies and the investment community. • Facilitating discussions rather than producing requirements. • Testing examples – existing or new versions developed - to identify best practice / characteristics that represent practical improvements. • Sharing widely through published reports, insight on approaches favoured by companies and investors, often using real examples.
3 Why Business model reporting? • In Summer 2014, the Lab conducted an online survey of stakeholders which attracted 350 respondents. • Risk reporting, Viability reporting, and Business model reporting were high on the agenda of all stakeholder groups. • Lab announced a series of projects in Summer 2015 on those three areas of reporting. • First: Business model reporting as it provides a foundation for other reporting • Next: Risk reporting and Viability reporting
4 What do companies say? 19 companies participating – AIM to FTSE 100. Mixture of Finance, IR, and Communications representatives. Many are not convinced of the value of business model reporting, but want to hear more from investors: • Limited review from the Board. • What information and how detailed? Our competitive advantage is commercially sensitive information. • Investors know our business model. • We never receive questions on our business model. • It’s a compliance exercise. • Would investors be concerned if the information was removed?
5 What do investors say? 35 investors – retail, buy-side, sell-side, and credit rating agencies. Business model reporting is fundamental and there is significant room for improvement. Investors always ask about the business model. Investors want to understand: • What the company does. • Key inputs, products/services, revenue, profit and balance sheet drivers, and stakeholders. • Markets and market share. • Significant threats to the business model. • The company’s competitive advantage.
6 What do investors say? Investors want the information presented: • At the front of the Strategic Report. • In plain, clear & concise, factual language – no promotional language. • In detailed narrative with summary infographic that is easy to understand. • For each material segment/division with a different business model. • With changes in business model clearly identified. Good examples identified by investors: • Vodafone 2015 ARA • ARM 2015 ARA
7 Next steps Round tables to be held mid-July with participants to: • Confirm the findings. • Consider practical and pragmatic reporting solutions. Report expected to be published in October.
8 Published Reports Financial Reporting: • • Disclosure of dividends – policy and practice Accounting policies and integration of related financial information William Hill plc – accounting policies case study Debt terms and maturity tables Net debt reconciliations Operating and investing cash flows Presentation of market risk disclosures Governance: • Reporting of Audit Committees • A single figure for remuneration • Reporting of pay and performance Thematic: • Corporate reporting in a Digital World - Digital present • Towards Clear & Concise Reporting All reports are also freely available to download: https: //frc. org. uk//Lab/published-project-reports
Find all the Lab’s reports and updates on current activities through our web page: https: //frc. org. uk/lab You can also follow us on Twitter @FRCnews or on in Linked. In
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