Something tugs at the heartstrings when old memories surface to the present. Such reminiscence connects me to something familiar, keeping me comfortable even when life gets busy.
Capitalizing on the past is not just a good art form these days —nostalgia is becoming profitable. From “new” movies to the return of supposedly “obsolete” products, it’s not surprising to see how these products return to their roots and get upgraded using current technology.
Recently, the reboot of the classic Nokia 3310 started getting a lot of attention. Maybe some people are rooting for Nokia to get back into the mobile handset market. Perhaps, it’s also because one of the reported features of the “resurrected” handset is an improved battery. Whatever the reason may be, it is truly remarkable that after more than 15 years, this mobile handset still commands strong demand, based on social media feeds and reported pre-sale orders by retailers. It speaks about the “iconic” status of the 3310 and reliability of the Nokia brand.
Revamping old models to get an upgrade is not new. For example, Disney is breaking box office with live-action movies on their classic films such as Cinderella, Maleficent and—opening next week—Beauty and the Beast.
In my view, for every product that makes a business successful, the other side of the story is the telling. And a reliable manner of telling how businesses have performed is captured in the financial statements.
However, mention “financial statements” and the general view is that financial reports have become too complex and difficult to read, and that financial reporting tends to focus more on compliance than communication. At the same time, users’ tolerance for sifting through information to find what they need continues to decline. These have implications on the reputation of companies that fail to keep pace.
You can’t blame the accountants because financial statements have always had the same manner of presentation. The International Accounting Standards Board pushed the “break” in the “traditional” financial statement after completing the first step in its Disclosure Initiative, which aims to improve the effectiveness of disclosure in financial reporting. While the amendments are not significant, sometimes the small changes are what help make a whole lot of difference.
Some of the best practices that have been emerging globally over the past few years to make financial reports more relevant include:
Personalized display. Information should be reorganized to tell the story of financial performance more clearly and to make critical information more prominent and easier to find.
Streamlined content. Management should consider the understandability and comparability of financial statements when it decides on the order of the notes. Such flexibility, already permitted by IAS 1, allows management to tailor their presentation to their circumstances. Additional information should be included where important to better understand the company’s performance. For example, a summary of significant transactions and events may be presented as the first note to the financial statements.
Simplified body. The language used must be simplified. The key here is to make the disclosure conversant with the reader and not to replicate the provisions of the accounting standards.
The structure of financial reports should reflect the company’s particular circumstances and the likely priorities of its stakeholders. Of course, there is no “one-size-fits-all” approach. Companies should engage with stakeholders to find out what would be most relevant to their financial report.
In April 2016, PwC published a global investor survey, Redefining Business Success in a Changing World. One of the survey questions relates to measuring and communicating success. We asked CEOs and investment professionals on areas where businesses measure and communicate impact and value to stakeholders.
As companies use technology to better communicate and measure success, it’s important for financial reporting to keep pace and make sure that it is fit for the purpose. In the survey, traditional financial statements placed 10th, with 30 percent of respondents agreeing that improvement was needed in measuring and communicating business success. CEOs think that improvement in financial reporting will be driven by data and analytics.
While the next breakthrough in financial reporting has yet to be tapped, at least for now, it’ll be in with the old.In this situation, yes, there is comfort in the familiar.
Carlos Federico C. De Guzman is a director from Assurance of Isla Lipana & Co./PwC Philippines. Email your comments and questions to firstname.lastname@example.org. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
CARLOS FEDERICO C. DE GUZMAN