CFOs are losing confidence in corporate reporting

By CFO Innovation Asia Staff


CFOs are losing confidence in corporate reporting and its effectiveness, as pressure from audit committees, the complexity of implementing new reporting requirements and reporting overload affect performance, according to an EY report.

In the global survey of 1,000 CFOs across 25 countries in organizations with revenue greater than US$500m, CFOs’ confidence across all aspects of corporate reporting has fallen compared to last year. Only 55% are confident in the degree of compliance, compared with 84% last year.

Also declining is the consistency in the application of key performance indicators, at 44%, compared to 66% in 2014; less than half (45%) feel confident in the clarity and relevance of messages, down from 67% in 2014.

Singapore respondents, however, reported much higher confidence levels in the degree of compliance (82%), but are less confident in the consistency in the application of key performance indicators (38%), and extent of benchmark reporting to peers (Singapore: 25%, global: 44%).

“The dynamics of operating in Singapore, especially the regulatory, taxation and enforcement regimes, which have less punitive outcome and less overbearing oversight, create a relatively more comfortable environment for Singapore respondents to operate in,” says Chiang Joon-Arn, EY’s Asia-Pacific FAAS Leader.

“Balanced against this, many key performance indicators or benchmarks are driven by American and European influences and may be more tailored to their needs, thus creating more uncertainty for local CFOs.”

CFOs’ view of the effectiveness of the cost of corporate reporting has fallen significantly year-on-year, at 39% (Singapore: 30%), compared to 68% in 2014. Just 48% said that their reporting was effective in securing the confidence of the board, a significant drop from 71% last year. Singapore respondents fare better, with 70% indicating their effectiveness in securing the board’s confidence.

Yet a-third of CFOs (global: 32%, Singapore: 30%) agree that meeting the needs of the audit committee and supervisory boards is the most critical factor in driving the importance of effective reporting. External reporting fares no better, with less than half of CFOs (global and Singapore: 43%) saying that their reporting is effective in meeting the expectations of those outside their organization.

Chiang says: “Corporate reporting needs to be all things to all people — relevant, timely and cost effective. CFOs need to step back and evaluate what they are producing and address concerns over confidence and effectiveness quickly. To delay means that the timeliness and accuracy of reporting will continue to affect performance. Corporate reporting will only serve its intended purpose if the CFO is confident of its value.”