Financial reporting changes 'could lead to short-termism'

News Article - 23 May 2012
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Accountancy institutes have issued a warning after proposals to make financial reporting more real-time and internet based were outlined by the big four companies.

The four firms called for the replacement of quarterly and yearly financial reporting with continuous real-time disclosures.

James Barbour, director of accounting and auditing at the Institute of Chartered Accountants of Scotland, told the Herald: "Some people are already concerned that a move to quarterly reporting would promote short-termism. But real-time reporting would be even more likely to promote it."

Richard Mallett, technical development director at the Chartered Institute of Management Accountants, told the publication: "What investors and other stakeholders want is quality of information, not just sheer quantity.

"We already have a disclosure regime where if something material or price-sensitive happens to a listed company, it should disclose this to the market straight away."

Mr Mallett added that raw data needed to be supported by insight and analysis, which may be hard for companies to produce on an hourly basis because the information would have to be set into context.

According to the Herald, a spokesman for the Association of Chartered Certified Accountants said: "The case for more frequent reporting is not made convincingly. Precisely which stakeholders would benefit and what improvements in assurance would have to take place first are not made clear."

The big four companies are aiming to increase the scope of financial reporting to include other data which could give insight on the performance and prospects of a company, Accountancy magazine reports.

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