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CFOs Say Reporting Demands Rising

by FEI Daily Staff

CFOs of global organizations says they're facing a broader array of information demands from shareholders and regulators.

According to a report by EY's Financial Accounting and Advisory Services (FAAS) practice, nearly three-quarters of the respondents say their company's financial reporting is expanding beyond compliance requirements to include areas such as organizational strategy and forecasting.

This trend mirrors the broader evolution of the finance function. As finance grows beyond its traditional retrospective focus, its more strategic and forward-looking contributions to the organization are mandating changes in reporting philosophies as well.

"CFOs are increasingly aware of the need to move beyond [compliance requirements] and provide information that will give them an edge over their competitors when attracting investors," said Peter Wollmert, EY’s Global and EMEIA FAAS leader, in a statement. "At the same time, they have to improve the range of data they provide internally to satisfy management, board and audit committee demands.”

Growing Demands

Three-quarters of respondents say the reporting environment has become more complex in recent years, with the pace of regulatory change increasing, and investors and capital market participants asking for a higher volume of disclosures. At the same time, CFOs and controllers face increased information demands from the board and senior management.

To meet these needs, three-quarters of the respondents have more than five reporting systems, and a similar number must comply with more than five reporting standards.

Along with more complex reporting environments, CFOs are also facing demands for efficiency. In the survey, 97 percent of the respondents said they're addressing a need to reduce the time and costs associated with financial and performance reporting.

Finance function downsizing has made it more difficult to have the available resources to improve reporting, according to the majority of respondents. Similarly, recruiting and retaining finance talent also remains a challenge.

Despite these issues, however, CFOs and controllers are optimistic about their ability to enhance reporting and communications with stakeholders.

More than three-quarters (78 percent) believe they'll be able to introduce efficiencies into their reporting processes by integrating or upgrading IT systems, making data more consistent and widely available, and optimizing processes.

Broader Focus

CFOs say stakeholders are also asking for a broader range of data that increasingly address financial and non-financial aspects of the organization's performance. Within three years, 90 percent of respondents expect to report on forecasting, sustainability, and corporate social responsibility -- each of which may require expanding existing reports, creating new ones or, most likely, a combination of those approaches.

Today, more than half of companies do not report on most of these aspects. Over the next three years, however, 90 percent of the respondents plan to issue reports addressing those topics.

Other changes are likely to include a shortening of the reporting cycle and the introduction of more real-time reporting, as well as a greater focus on non-financial reporting around strategy, sustainability and risk management.

CFOs and controllers believe this expanded reporting, on the whole, will benefit the organization. With more information at their disposal, they expect to generate better business insights, and to align internal reporting and management processes with disclosures to external stakeholders more effectively.