Warning on CSR disclosure
Dec 02, 2009
Don’t stuff annual report with information not related to the business, says UK accounting body
A member of the UK’s Accounting Standards Boards (ASB) has warned issuers that information on corporate social responsibility (CSR) is cluttering annual reports.
Melanie Kerr, project director at the ASB, which sets UK reporting standards, said companies need to focus on what is material to the running of their business.
Speaking yesterday at a webinar run by the UK’s IR Society (IR Soc), Kerr commented: ‘I think the key here is materiality. Companies should really comment on CSR matters in their annual report to the extent that they do impact on the long-term sustainability of the business. But more detailed explanations of sustainability issues that go beyond this are, in our view, probably best dealt with in a separate report.’
She added: ‘Reports are trying to meet the needs of too many different types of users. There is a need to focus on the needs of primary users, which we concluded were capital providers and their advisors, rather than trying to meet more specialist needs, such as for environmental information that isn’t material to the overall business results.’
Kerr and her colleagues are currently assessing the feedback to a report on complexity in financial reporting released in July this year. She said they have received 30 responses and ‘the Financial Reporting Council is currently discussing the comment letters internally in order to plan what our course of action will be going forward.’
‘There [was] the most support for improvements in cash flow disclosure and clarifying the application of materiality,’ noted Kerr of the responses. ‘Respondents also asked us if technology could reduce complexity, for example by moving information out of the annual report and on to websites.’
Michael Mitchell, general manager of IR Soc, also featured on the webinar. He summed up the general mood that it has been a tough year for corporate reporting, given the market slump and the implementation of new reporting requirements for UK companies.
‘[It has been] a turbulent year, a year in which it was ever more important that the facts behind the results were clearly communicated by companies to the market. And 2009 was also the year when most companies had to adopt the full reporting requirements of the Companies Act 2006,’ explained Mitchell.
‘Last week we had the Society’s awards for best practice in communication and looking at nearly 100 entries, one of the features that struck me was the increasing length of accounts. The other issue that struck me was that despite their best endeavors, some companies were still not getting the message across very clearly. And in many cases the judges too felt that there was still room for companies to explain and communicate more clearly.’
The webinar - the last of the year from IR Soc - was sponsored by PrecisionIR.