Embed Size (px)
Citation preview
Why we must develop a 21st century business reporting model
WICI-JapanOpen meeting at KPMG AZSAFebruary 27, 2009
Mike [email protected]
© Grant Thornton LLP. All rights reserved.
What’s wrong with today’s financial reporting model?
• Not enough focus on investor, analyst, stakeholder information needs
• Financial reporting not relevant (linked) to internal management
reporting and decision-making
• Information difficult to prepare (disparate internal systems), understand
(opaque, complex) and access (dense, paper-based)
• Boilerplate discussion of strategy, plans, opportunities, risks
• Limited disclosure of KPIs
• Little or no focus on ES&G
© Grant Thornton LLP. All rights reserved.
The capital markets need more relevant information
Book-to-Market Value S&P 500
'78 '06'05'04'03'01'00'99'98'97'96'95'93'92'91'90'85'80 '94 '02$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
Value($ millions)
Year Book Value Market Value Earnings
Accounting ProfessionRelevance & Sustainability Gap
© Grant Thornton LLP. All rights reserved.
The forces of change
• Convergence in accounting standards– Convergence of U.S. GAAP and IFRS the first step in convergence of corporate reporting more
broadly under a principles rather than rules-based approach
• Demands for information on ES&G issues– NGOs and others are increasingly effective in making clear what type of information they want
from companies which broadens their external reporting requirements
• Rising expectations of all stakeholders– The size of the world’s largest global companies has turned them into institutions that are
important to society in general and their obligations to responsibly fulfill this role are increasing
• Growth of the Internet and XBRL– Companies and regulators are increasingly relying on the Internet to report and collection
information and adoption of XBRL is growing
© Grant Thornton LLP. All rights reserved.
The current crisis
• The collapse of the financial markets– Lack of underlying information on certain types of transactions (e.g., subprime
mortgages and credit default swaps) a major cause of this collapse
– Short-term earnings are an especially unreliable guide in the current economic
environment and so investors are looking for other measures of performance
• The critical question– Given the cumulative societal cost of the credit crisis; can we afford to ignore the
possibility that a new, more transparent business reporting model might contribute to
restoring trust and confidence?
© Grant Thornton LLP. All rights reserved.
Restoring trust in the global financial system
• Stakeholder focus• IFRS, Value
creation, ES&G & KPIs
• Linked to management reporting
• Easy to access
• Web-delivery of information
• XBRL
• Stakeholder expectations
• Data reliability• Continuous
auditing
• Individuals• Institutions• Regulators• Media
Transparen
cy
The Intern
et
Assurance
Confidence
© Grant Thornton LLP. All rights reserved.
WICI Framework V1.0
0 Corporate profile and business attributes0-1 Industry overview0-2 Duration and results per business unit0-3 Business cycle per business unit0-4 Competitive analysis
A Business landscapeA-1 Business landscape summaryA-2 EconomicA-3 Industry analysisA-4 Technological trendsA-5 PoliticalA-6 LegalA-7 EnvironmentalA-8 Social
b Strategyb-1 Corporate strategy summaryb-2 Vision and missionb-3 Strengthsb-4 Weaknessesb-7 Goals and objectivesb-8 Corporate strategyb-9 Business unit strategiesb-10 Business portfolio
c Resources and processesc-1 Resources and processes
summaryc-2 Resource formsc-3 Key processesc-4 Value drivers
d Performanced-1 Performance summaryd-2 GAAP-basedd-3 GAAP-derivedd-4 Industry-basedd-5 Company-specificd-6 Capital market-based
A Business landscapeA-1 Business landscape
B StrategyB-1 Corporate strategy summaryB-2 Vision and missionB-5 OpportunitiesB-6 ThreatsB-7 Goals and objectivesB-8 Corporate strategyB-9 Business unit strategiesB-10 Business portfolio
D PerformanceD-1 Financial prospects summary
C Resources and processesC-1 Resources and processes summary
Past Present Future
© Grant Thornton LLP. All rights reserved.
Change is never easy, but it does happen
• The Americas– Nike, Sun Microsystems, Timberland
• Asia-Pacific– BHP Billiton, Infosys, Ricoh
• Europe– Allianz, BMW, Novo Nordisk
Why we must develop a 21st century business reporting model
WICI-JapanOpen meeting at KPMG AZSAFebruary 27, 2009
Mike [email protected]
