Investors call for more meaningful and consistent financial disclosure

KPMG investor opinion survey reveals need for clarity and simplification in reporting

 

Some of the City's leading investors are calling for greater consistency and clarity in financial reporting, according to a new report published today by KPMG. Many of them believe that accounts are increasingly becoming regulatory filings rather than documents offering real insight into the ongoing performance of a business.

The report finds that:

  • Over three quarters of investors (78 percent) would like more information on what assumptions financial statements are based on
  • 74 percent of investors would like more clarification on exceptionals
  • Nearly six in ten respondents (58 percent) would welcome a clearer divisional breakdown highlighting exactly where companies make their money
  • 48 percent would like more information on business risks and opportunities

The survey includes responses from leading UK institutions managing total global equity funds of $2.7 trillion . It examines areas of reporting such as financial statements, emerging markets, accounting procedures, ethical investment and views on London's position as a financial capital. It was conducted primarily to examine how UK published financial statements can be further improved to better serve the needs of leading investors.

While they have concerns about clarity and consistency, investors believe that overall the amount of information given in financial statements is about right, and the UK 'principles-based' approach to accounting receives a clear endorsement, with 70 percent of respondents favouring it over the more rules-based US approach.

But KPMG's research also highlights that investors require more comprehensive information on companies from emerging markets. An overwhelming 90 percent of investors highlighted a need for more information on company strategy and details of the market in which the business operates. In addition, 62 percent of respondents expressed a requirement for more opinion on companies reporting from emerging markets.

Respondents of the survey are in agreement that the strength of London as a financial centre is its principles-based approach to regulation and that any changes to this could jeopardise that strength. Investors identified three particular areas that could jeopardise that strength; (i) implementation of rules akin to Sarbanes Oxley; (ii) any efforts to scrap the FSA light-touch approach; and (iii) any changes to the overall burden of regulatory rules.

KPMG Chairman, John Griffith-Jones, comments:
"Investors have raised some important concerns. With financial statements increasing in length and complexity, there is clearly a need to ensure that there is consistency and transparency in the way that information is presented. If that is not happening at the moment, then the financial community needs to look collectively at ways of improving it.”

Richard Bennison, Head of Audit at KPMG, adds:
"We are keen to see more dialogue between all parts of the financial community so that accounts meet different stakeholders' needs effectively. Getting the balance right between meeting regulatory requirements and providing accessible and useful insight is clearly key. I hope that the principles-based approach on which UK accounting is founded will continue to be strongly embedded - otherwise there is the danger that we will see financial statements becoming more and more complex and opaque to the common user.”


Audit 01 October 2007


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Further information:
Mark Hamilton, KPMG Corporate Communications

020 7694 2687 


About KPMG:
KPMG is the global network of professional services firms who provide audit, tax and advisory services. KPMG LLP operates from 22 offices across the UK with over 10,000 partners and staff. KPMG in the UK recorded a turnover of £1.45 billion in the year ended September 2006. KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.