By Joachim Schindler, Global Head of Audit, KPMG
The global financial system is slowly undergoing a series of reforms, but one crucial element of reconstruction is being ignored. The corporate reporting model in its current form does not meet the needs of investors. It is also becoming increasingly difficult for it to fit the requirements of preparers, auditors, regulators and standard-setters. It is time to begin a wide-ranging debate about what is wrong with the current model and how to change it.
In a new publication on the future of corporate reporting, we tested the premise that fundamental reforms were needed by interviewing ten international leaders in the field, including Hans Hoogervorst, chairman of the International Accounting Standards Board, and Mervyn King, chairman of the International Integrated Reporting Council. All agreed on the need for change but they did not concur on how far-reaching the reforms had to be or what should be altered.
But why change a reporting system that has evolved over decades? After all, the International Financial Reporting Standards have now been adopted in 100 countries. They have enhanced the comparability of companies’ performance and improved the efficiency of capital markets. And there is general agreement that corporate reports provide a reasonable estimation of the financial condition of a company at a specific point in time. Yet there is so much more being asked of corporations than simply reporting on what has happened over the past quarter or year. In a series of blogs, we will focus on what is wrong with the current reporting model and where we should go from here.