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Does extended reporting work... Ask the Institute
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23 August 2006 
 
Three in-depth reports on broad based business reporting have been launched today by the Institute of Chartered Accountants in Australia. The reports will help Australian businesses better understand extended reporting options and will provide a significant contribution to thought leadership for the profession.  
 
Graham Meyer, CEO of the Institute, said requirements for non-financial reporting have expanded with the demand for greater accountability and sustainability from the Government and public.  
 
“Globally, we have seen a number of techniques develop to provide the type of reporting required by key stakeholders, including triple bottom line and balanced scorecard. There has been much commentary about their effectiveness and value.  
 
“The Institute recognises the need for the accounting profession to both understand the emergent forms of reporting, but also the value of these reports to business and the public”, he said.  
 
The three-part series reviewing Broad Based Business Reporting includes:  
 

  1. Extended performance reporting: an overview of techniques;
    2.  
     
  2. Extended performance reporting: a review of empirical studies;
    3.  
     
  3. GAAP-based financial reporting.
 
The ‘Extended performance reporting: an overview of techniques’ report provides an overview of the major initiatives in extended performance reporting in Europe, US and the Asian-Pacific region. It focuses on specific forms and techniques of extended performance reporting and summarises the major techniques.  
 
The second in the series, ‘Extended performance reporting: a review of empirical studies’, reports on extended corporate reporting and its contribution to corporate value. The report examines two areas of reporting: first, corporate reporting on socially responsible and environmentally sustainable practices and second reporting on intangible assets such as intellectual capital.  
 
It includes:  
  • An overview and trends on the disclosure of corporate social responsibility (CSR) and intangible assets over the past few decades;
    •  
  • A review of the usefulness of extended corporate reporting from a stakeholders’ perspective;
    •  
  • An empirical study on the impact of voluntary reporting on the capital markets;
    •  
  • Recommendations for improvement e.g. developing ASX Corporate Governance Council’s principles and or a move toward a global reporting standard.
 
 
The third report, ‘GAAP-based financial reporting’, addresses criticisms about generally accepted accounting principles (GAAP), such as income, which businesses must produce.  
 
These criticisms take a number of forms, but broadly they fall in three categories.  
  • Firstly, there are the accusations that as business models have changed; the GAAP model of performance measurement has failed to keep up;
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  • Secondly, there is the accusation that existing GAAP allows sufficient flexibility to result in measures of performance being compromised by managerial manipulation;
    •  
  • Finally, improvement of the GAAP system is required.
 
The report concludes:  
  • That GAAP accounting measures have proven to be a relatively robust way of assessing performance;
    •  
  • Critics need to identify how their preferred solution is not subject to many of the same criticisms directed at the existing reporting model;
    •  
  • he fundamental elements of the GAAP model have had a long development period and are relatively well understood by various users;
    •  
  • While GAAP can be improved and extended, it is simply not correct to conclude that measures based on GAAP are unsuitable for measuring business performance.
 
Further detail on the reports can be found in the Notes to Editors below. The full reports are also available from the Chartered Accountants website, www.charteredaccountants.com.au