Financial reporting shapes investor’s decision and determines, whether a company receives financing. It includes traditional and required channels such as annual and quarterly report but may also take on new forms such as information provided on the company website or social media channels. Besides an intrinsic motivation to supply the market with valuable information, regulators such as the SEC and accounting standard setters are in the process of promoting improved disclosure.
EY finds that about three-quarters (74%) of surveyed companies are already taking actions to improve disclose effectiveness. Thereby, many have made positive experiences: Nearly all of them (97%) improved their financial communication, 78 percent have improved their process efficiency and 39 percent have reduced their financial report preparation time. To achieve goals such as providing a clear snapshot of the company, enhance financial communication and improve decision making, EY advised firms to address financial reporting as early as possible.
In their survey “Disclosure effectiveness: companies embrace the call to action”, EY finds that improving financial reporting is driven by firms’ top management. In 53 percent of surveyed companies, the management team and seniors-level executives influence is the biggest reason for the due changes. Thereby, firms aim at focusing on material and eliminating immaterial information, reducing redundancies, and eliminating outdated information. It is important, finds EY in the survey, to engage stakeholders from the start, discuss plans with the audit committee and ensure top management commitment.