Big variety in NZ company reporting

LAURA WALTERS
Last updated 11:03 12/06/2013

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Financial reporting practices, especially when it comes to management commentary, range widely among New Zealand's largest companies, a recent survey shows.

The 2013 Deloitte New Zealand Financial Reporting Survey, which looked at the 2012 annual reports of 100 listed and other large companies with publicly available information, found management commentary ranged from nothing to 74 pages.

The notes from managers varied from a focus on current-year performance to significant detail on the company's business model, divisional performance and prospects, the survey said.

Deloitte technical partner Denise Hodgkins said some variability in commentary was expected due to the differing regulatory requirements, size and complexity of companies in the sample.

"However, the results raise the important question as to what information should be included in an annual report," she said.

The survey said there was no clear guideline of what management should be saying to keep their shareholders informed.

However, the International Integrated Reporting Committee (IIRC) is developing an international framework for integrated reporting and has a draft currently out for consultation.

"The IIRC defines an integrated report as 'a concise communication about how an organisation's strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term'," Hodgkins said.

Only 22 companies gave detailed information on their strategies and objectives and the better reports used maps and charts to explain the results against those, she said. Some reports also included diversity and sustainability information.

Information on diversity was a new requirement for NZX-listed entities, which from December last year had to include information on the gender-composition of directors and officers, and details on any existing diversity policy.

Nearly 20 of the companies surveyed disclosed diversity policies, but what they considered to be diversity was variable, Hodgkins said.

Some companies focused on gender and others expanded to include ethnicity, age, and backgrounds.

On average 13 per cent of board members and 14 per cent of executives were female, she said.

Management commentary continued to reference the challenging global economic environment, but was generally more positive in respect of the year ahead, the survey showed.

More than 250 alternative measures of profit were provided by 90 of the companies surveyed.

Alternative profit measures such as EBITDA (earnings before interest, tax, depreciation and amortisation), normalised earnings and operating profit, were used to communicate companies' yearly profits, the survey showed.

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The extensive use of alternative profit measures was consistent with the previous survey.

- BusinessDay.co.nz

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