Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Companies lag on business model reporting

by
4th Apr 2013
Save content
Have you found this content useful? Use the button above to save it to your profile.

Mentions of “business models” in financial reports are “inconsistent, incomparable, and incomplete” because of a lack of consistent guidance, according to a report by the International Federation of Accountants, CIMA and PwC.

Investors and other stakeholders want to know what makes companies tick and need clearer information on business models – a description of how a company makes money, including its capital, business activities, products and services.

The research was done at the request of the International Integrated Reporting Council (IIRC), which is due to publish guidance on “integrated” financial reporting later in April.

The IIRC defines integrated reporting as “communication about how an organisation’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term.”

CIMA chief executive Charles Tilley, said: “Corporate reports have become more complex yet provide less insight to investors on how value is created or destroyed. Integrated reporting will involve a change in mind-set for many organisations as they think about how to better communicate strategy, performance, and prospects. High-quality business model reporting is critical to helping investors better understand performance in terms of the impact external factors have on an organization, and how organizations create value that is sustainable over time.”

Mark O’Sullivan, director at PwC, said that a previous review of narrative reporting practices found that very few companies clearly articulate their business model—what they do, what they rely on, and what sets them apart from the competitors.

PwC research found that 77% of the FTSE 350 mention business models in their accounts, but only 40% provide insightful detail about those models. And only 8% integrate business model reporting with strategy and business risks.

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.