FRC proposes Vision for the Future of Reporting
Many of today’s corporate reporting habits are hangovers from a bygone era before digital technologies crept into every corner of our lives. As such, we have an opportunity to reimagine reporting from the ground up, taking the transformative impact of technological advances into account.
This week the UK’s Financial Reporting Council (FRC) has done exactly that, going back to the drawing board to set out a new model for 21st-century reporting.
The FRC proposes a model that unbundles all the existing functions contained within a single annual report, and in its place, sets up a network of different reports for different functions that are all governed by the same principles. The network of reports would be consistent, and ideally directly linked with one another to promote connectivity. Importantly, the report proposes a “Digital First” approach, which, as we understand it, means XBRL would play a key role in a wide range of disclosures.
The aim is to increase transparency while also promoting clarity, in response to complaints that annual reports are too long and impenetrable. The FRC underline that this new model of reporting would need to be supported by a structured data framework such as XBRL, and note that all data within the reporting network should be tagged to some degree to allow analysis, connectivity and reuse of data.
The FRC also echoes calls for international sustainability standards, seeing consistent disclosure of tagged non-financial information as a crucial part of the reporting network. The paper proposes that a ‘Public Interest Report’ be adopted, containing comparable non-financial information that is treated with the same importance and prepared with the same rigour as financial information.
Our perspective? Technology has made the traditional annual paper-based report redundant – structured data allows for far more flexibility, personalisation and immediacy. Different users can obtain exactly the information that they are interested in, almost instantly.
Preparers can develop a stronger and more reliable set of controls around their disclosures by embedding digital definitions into every aspect of their design. They can provide consistent and traceable digital facts that conform to those definitions by tagging each component within the entire network of their business reports. A truly digital reporting space could be so much more dynamic and useful than what we have today – and we welcome regulators and companies who want to explore what the future could look like.
Read the report here. The FCA is seeking feedback on its proposals, due by 5 February 2021.