11 December 2003
Charles Tilley, Chief Executive of CIMA, today welcomed the decision by the European Commission to abandon plans for mandatory quarterly reporting arguing that the nature of city expectations that drive the aggressive earnings game and the resulting 'short-termism' is a cycle that needs to be broken.
He said:
"City culture and the behaviour that drives business reporting will need to change fundamentally if long term value in companies is to be sustained. Too much focus on market expectations and short term profits is reducing the effectiveness of business reporting, and limiting companies' willingness to disclose information."
Stathis Gould, CIMA's Head of Technical Issues and one of the authors of CIMA's report Business Transparency in a Post Enron World, said:
"The current system of financial reporting fails to meet the needs of today's economy. Companies can be more concerned with meeting market expectations than with providing comprehensive information to enable an accurate valuation. Business reporting should provide users with more forward looking information about all the relevant value-drivers, including non-financial ones."
Charles Tilley added:
"Performance measures used internally and those reported to external stakeholders should not be radically different. Companies should focus on measuring and reporting their main value drivers – not on getting the right figure to satisfy the market expectations."
Business Transparency in a Post-Enron World is available from CIMA. Its aim is to bring the diverse strands of the transparency agenda together in one place for senior finance professionals and their colleagues. It explores arguments for and methods/processes to enable improved disclosure, including XBRL (Extensible Business Reporting Language), international accounting standards, the Operating and Financial Review (OFR), sustainable development and Global Reporting Initiative. Download the report from CIMA's Knowledge Bank.
If you would like more information please contact Lottie Muir
Phone: +44 (0)20 8849 2407
Email: lottie.muir@cimaglobal.com
