This article was first published in the November 2012 UK edition of Accounting and Business magazine.
How can you improve your communications with the capital markets through your corporate reporting? Our 12 practical reporting tips – based on what investors tell us they would like to see in reporting – are a great place to start.
Have a backbone
Use your objectives and strategy to underpin your reporting and provide the context for your activities and performance. Strategic statements set in isolation from the rest of your reporting can appear hollow.
Back to basics
Explain your key capabilities and the key resources and relationships you depend on to create and sustain value. Consider both your key inputs/outputs as well as your own activities, and demonstrate how your business model interacts with other reporting elements.
The big picture
Put your results in the context of market trends. Provide management’s perspective on the competitive landscape and macro environment to allow the reader to evaluate your strategic choices and actions.
Tell the whole tax story
Provide clear information for stakeholders on the sustainability of current tax rates and how tax impacts your business, looking more broadly at tax strategy, risk management and the wider impact of tax as well as detailed tax performance in the tax note.
Cash is still king
Explain how you make money, generate cash and are funded. Competition for capital is fiercer than ever before, so consider including detailed disclosure about your operating cashflow strategy and performance and consolidating your debt disclosure. Provide details of your debt maturity schedule and reconciliation of free cashflow to movements in net debt.
Survival of the fittest
Demonstrate an understanding of the material sustainability risks and opportunities relevant to you and your key stakeholders and how they’re integrated into your core corporate strategy. Consider the impact of your business across your entire value chain when considering materiality.
Challenge whether the segment analysis is not just compliant but also makes visible the dynamics inherent within the business. Consider including a few additional line items such as working capital, operating cashflow and capital employed for each segment.
Flash in the pan?
Explain what is driving financial performance – is growth sustainable? Consider using bridge charts to help investors understand what is driving revenue profit and growth. Ensure non-GAAP measures to support your messaging are clearly identifiable, consistently defined and reconciled to your GAAP numbers.
Not the kitchen sink
Highlight principal risks, not all risks. How might they derail your strategy? How are they managed? How has the risk profile changed during the year and what is the sensitivity of underlying performance to changes in these risks?
What gets measured gets done
Identify key financial and operational KPIs used to assess progress against strategic priorities. Explain clearly how management are incentivised, highlighting the link between strategy, KPIs and the remuneration package.
Crack the code
Go beyond compliance and bring governance reporting to life by demonstrating the activities of the board, the skills and experiences each board member brings to the table and how they interact.
Join the dots
Avoid silos and present a clear, coherent and integrated picture of how your strategy, governance, performance and prospects lead to long-term value creation.
Alison Thomas is a corporate reporting specialist at PwC.