1. Enhancing Quality in Corporate Reporting: Responsibilities of Board of Directors
‘Enhancing Quality in Corporate Reporting: Responsibilities of the Board of Directors’
The objective of this part of the workshop is to help business directors and accounts preparers to understand the importance of quality corporate reporting to their business and how their role fits into that.
Well, in an economic climate of uncertainty sometimes bordering on mistrust and fear, it is critical that as preparers, auditors and regulator, we work together to ensure that reliable and trusted financial and non-financial information are made easily available to the market users.
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2. In fact, What information the users want
In fact, What information the users want? .. They want access to more accurate and relevant information about companies, transactions, markets and risks. (Slide) .. they….
Meaning that the companies have to communicate the information needed by the investors.
On the other hand, we have Regulators who are moving to exert more control on reporting. Meaning that the companies have to comply with the legal requirements as well.
Hence, the challenge is to balance compliance and communication.

3. Areas to be covered What is corporate reporting and why do we need it?
Regulatory requirements – Companies Act 2001 Financial Reporting Act 2004 and the Code of Corporate Governance for Mauritius
Roles and responsibilities of directors in Corporate Reporting
Evolving Corporate Reporting trends – Where are we going?
During the presentation, the following areas would be covered:
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4. What is Corporate Reporting and why do we need it?

5. What is corporate reporting?
Corporate reporting = all the mechanisms by which companies communicate their performance and activities to their stakeholders
- Financial reporting
- Corporate governance
- Executive remuneration
- Corporate social responsibility
- Narrative reporting
- Integrated reporting
Presentation & disclosure aspects of:
That is communicating the past actions of the company, the results of those past actions and the intended future actions of the company.
Corporate Reporting includes the presentation and disclosures aspects of …. (Slide)
Financial reporting which is the core of the corporate reporting model. Financial reporting consists of financial statements and accompanying notes that comply with IFRS.
Corporate governance – that is the processes by which companies are directed and controlled. Here, we are referring to the requirements of the Code of Corporate Governance for Mauritius.
It includes disclosures on Executives remuneration – that is how executives are rewarded for delivering their company’s strategic objectives.
Corporate responsibility - includes the communication about how companies understand and manage their impact on people, clients, suppliers, society, and the environment in order to deliver increased value to all their stakeholders.
Narrative reporting - is shorthand for the critical contextual and non-financial information that is reported alongside financial information.
Integrated reporting – is about connecting information about an organisation’s current decisions with its future prospects
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6. Describes performance For a specific audience
Corporate Reporting
Describes performance
Involves measurement
Is a recurring process
For a specific audience
Hence, in summary – Corporate Reporting
Describes performance
Where you are, where you come from and where you are going
Involves measurement
Against specific targets and objectives
Is a recurring process
As Over time the story emerges by reporting regularly against consistent indicators
For a specific audience
That is the practice of measuring, disclosing and being accountable to stakeholders.
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7. The Corporate Reporting supply chain
Corporate Reporting is not a product of one person. In fact, it is a process which involves various groups of people. Slide ….
Management under the general direction of the board of directors, who prepares the financial information for eventual approval by the board and, the general meeting of shareholders.
The auditors interact with management and the board while auditing the financial information and provide independent opinion on the FS.
We have the media and others who distribute financial information.
Analysts and credit-rating agencies who evaluate the information, to be used by the investors and other stakeholders.
Also within the chain there are the various standard setters in the areas of financial reporting, auditing, and corporate governance.
The regulators, who enforce those standards and professionals, such as (per slide)…
Enabling technologies of many kinds are used by all participants such as XBRL which is being implemented by the BOM and the Companies Division.
All these are involved in Corporate Reporting, but to have quality corporate reporting, all links in the chain need to be of high quality and closely connected.
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8. Why companies produce a corporate report
There are two main reasons for producing an annual report:
The first is to meet the government’s regulatory requirements; and
The second is to market the company to key stakeholders.
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9. Annual report – Regulatory Requirements
Statutory disclosures
Companies Act Sec 221: Contents of an Annual Report
Financial Reporting Act Section 75: Corporate Governance
S75(2) – Every public interest entity shall, adopt corporate governance in accordance with the National Code of Corporate Governance.
S75(3) – Every public interest entity under subsection (2) shall submit to the Council a statement of compliance with the Code of Corporate Governance and where there is no compliance, the statement shall specify the reasons for non-compliance. Guidelines on Compliance with the Code of Corporate Governance by PIEs
Let’s first have an overview of the regulatory requirements.
…… Statutory Disclosures
In fact, information disclosed in the annual report includes material framed by statutory and regulatory requirements articulated in the Companies Act 2001, the Financial Reporting Act, and other rules and regulations such as the SEM Listing Rules, the Banking guidelines.
Next Slide - Companies Act Section 221
Concerning the Financial Reporting Act, we have Section 75 which requires every PIEs to adopt Corporate Governance on a ‘comply or explain’ principle.
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10. Annual report – Regulatory Requirements (Continued)
Financial Statements
CA Sec 210: obligation of Board to prepare Financial Statements & signed on behalf of Board by 2 directors
CA Sec 211(3): Financial Statements to comply with IFRS (public & private companies)
Auditor’s report
CA Sec 205(1): The auditor of a company shall make a report to the shareholders on the Financial Statements which have been audited
…… Financial Statements
Legally, the board must approve a company’s financial statements, and generally two members of the board sign them. Directors are ultimately responsible for financial statements. Well these are governed by Sections 210 and 211 of the Companies Act where it is an obligation for directors to prepare financial statements that comply with IFRS.
……. Auditor’s Report
(Slide)

11. Annual report – Regulatory Requirements (Continued)
Auditor’s report
FRA 2004 Sec 39(2): No licensed auditor shall, in his report, express an opinion unless he has complied with the auditing standards.
FRA 2004 Sec 39(3):The licensed auditor shall report on the extent of compliance with the Code of Corporate Governance disclosed in the annual report of the public interest entity and on whether the disclosure is consistent with the requirements of the Code. Guidelines issued by FRC
Voluntary reporting: Chairman report, CEO report, Sustainability report
These are the main legal requirements relating to Corporate Reporting.
But We also have voluntary reporting which normally includes Chairman’s report, CEO’s report and sustainability reporting.

12. Contents of annual report - S221
Nature of business
Signed company FS + Group FS (where relevant)
Auditor’s report
Particulars of entries in interests register during accounting period:
Term of director’s service contract with its date of expiry
Any notice period for termination of contract
Particulars of provisions for predetermined compensation on termination exceeding one year’s salary & any benefits including benefits in kind
Total remuneration & benefits received / due & receivable from the company & related corporation (separately for executives & NEDs)
Total amount of donations
Names of persons holding office & ceased to hold office as directors
Audit fees & fees for other services – separate
Referring to the Companies Act, the Disclosures as required by Section 221 relate to … (Slide)
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13. Corporate reports – main concerns
Weakness in the corporate reporting model
Inadequate disclosures;
Lack of trustworthiness;
No integration of essential information;
Lack of leading indicators of future performance;
Environment, Social, governance (ESG) issues at infancy stage;
Backward looking;
Irrelevance of information; and
Compliance mindset.
But corporate reporting is still viewed by many as an exercise of regulatory compliance.
Its function as the key communication document to stakeholders is lost in a sea of boilerplate and unenlightening disclosures which differ little from company to company.
As CIMA has mentioned, concerns about the increasing complexity and decreasing relevance of corporate reports have been growing in recent years.
(In fact the elephant on the slide represents the big, complex annual report)
The weaknesses noted in the Corporate Reporting Model by CIMA are:
Inadequate disclosures;
Lack of trustworthiness;
No integration of essential information;
Lack of leading indicators of future performance;
No alignment to core strategy;
Backward looking; and
Compliance mindset
…. Showing evidence that we have a problem. So, we have to act – to solve the problem
We have to refocus corporate reporting on its primary purpose that of providing investors with information that is useful for making their resource allocation decisions and assessing management’s stewardship.
Source: Tomorrow’s Corporate Reporting : A Critical System at Risk – CIMA
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14. Stakeholders’ expectations
The company has not made profits at the expense of the environment, human rights, or society;
There are adequate controls in place to monitor and manage material risks and opportunities;
Remuneration is linked to overall performance which includes social, environmental and financial aspects;
There is an interactive communication with the stakeholders who are strategic to the company’s business; and
The company is conducting a sustainable business.
That is … On reading a corporate report users should be able to tell that:
Well, …. Commitment, not checklists, will bring about real improvements in the quality and relevance of information provided in corporate reports.
But why we need to bring improvements in quality corporate reporting…. Because corporate reporting is important….
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15. The importance of Corporate Reporting
Influences decisions and actions of management
An essential element of corporate governance
Influences decisions and actions of shareholders and other stakeholders
Affects resource allocation (financial, natural and human resources) in society
Critical for investor confidence
Influences perceptions of the company’s customers, vendors, and employees
Shapes how a company sees itself in the future
As it …..(Slide)
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16. What is the main source of information you use to assess company performance?
And not to forget, it is important as people highly rely on corporate reports as concluded by a survey carried out by ACCA where 50% of the respondents consider a corporate report as the main source of information from where they assess company performance.
We have in our midst today not only auditors, but also participants who are members of Boards.
And referring to the corporate reporting supply chain, we have seen that Directors are involved in the provision of meaningful and useful information.
Re-assessing the value of corporate reporting, January 2012, ACCOUNTANCY FUTURES, ACCA
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17. Role of Board of Directors: Attributes needed
Strong willingness to both question issues and to speak out in meetings
Understand financial reporting- boards should help all of their members to develop financial literacy, not just those who sit on the audit committee
Understand the business of the company and the risks involved
Understand the company’s business model
Now I’ll stress on the attributes needed by the Members of Boards to ensure that corporate reports are of high quality, and that useful and meaningful information is provided to the users of the corporate reports.
A strong willingness to both question issues and to speak out in meetings is a necessary first attribute. The board chair should encourage everyone to ask questions.
In the area of financial reporting, boards should help all of their members to develop financial literacy, not just those who sit on the audit committee. This does not mean that every board member should know every accounting rule. Directors should have a culture focused on quality financial reporting
Board members do need to understand the business of the company and the risks involved. Referring to the Enron Scandal, the Enron directors were faced with complex transactions using complex business structures. Enron board may well have reduced the disaster if they had asked some penetrating business questions years earlier.
Board members need to ensure they are knowledgeable about the economics of the company and its business model. Again referring to Enron, Enron’s financial reporting might have been different if the board, alerted by Enron’s growth in revenues and their complex sources, had begun to ask the types of questions necessary to understand the company’s business model. A reliance on the systems and its data may not be enough. The board needs to understand the financial accounting data, which in turn requires an understanding of the business.
We have to learn from the mistakes made in the past and hence the attributes just mentioned need to be developed.
During the presentation we have been referring to quality reporting, but what is quality reporting????
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18. A Good set of Report and Accounts
A single story
How the money is made
What worries the Board
Consistency
Cut the Clutter
Clarity
Summarise
Explain change
True and fair
Well, it is important that boards consider whether their corporate reports display these reporting characteristics which would support the statement, required by the Corporate Governance Code, that their report and accounts are fair, balanced and understandable.
A single story – The companies should ensure that the narrative in the front end is consistent with the back end financial information;
Next, it should tell ….
How the money is made - The business review should give a clear and balanced account which should include an explanation of the company’s business model and the salient features of the company’s performance and position, good and bad.
What worries the Board – that is the risks and uncertainties described in the business review should be genuinely the principal risks and uncertainties that the Board are concerned about.
Next, there should be consistency….
Consistency – Corporate reports do contain highlighted or adjusted figures and key performance indicators (KPIs) referred to in the business review. These highlights or adjustments should be clearly reconciled and explained to enhance consistency.
Cut the Clutter
Important messages, policies and transactions should be highlighted and supported with relevant context and should not be obscured by immaterial detail.
Clarity
The language used should be precise and should explain complex accounting and reporting issues clearly; jargon and boiler-plate should be avoided.
Summarise
Items should be reported at an appropriate level of aggregation and tables of reconciliations should be supported by, and consistent with, the accompanying narrative.
The CR should Explain change
Significant changes from the prior period, whether matters of policy or presentation, should be properly explained.
Finally, the set of report should be True and fair
Meaning that the spirit as well as the letter of accounting standards should be followed.
You may be thinking that these do not happen in practice. But, believe me till now we have reviewed more than 650 annual reports and we have come across various cases where these qualitative characteristics do not exist.
But what is encouraging, we do have good reports as well, and where FRC has identified shortcomings, the entities have taken appropriate actions.
What can the Board of Directors do to help in enhancing quality corporate reporting? apply these principles now, to help reduce the complexity of their reporting without waiting for regulatory change.
And in doing so, you will have the benefits as Investors, analysts, and executives all believe that there would be significant benefits for companies in producing good corporate reports…. (Slide)
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19. Benefits of producing a good set of corporate report
More long term investors
Improved access to new capital & lower cost of capital
Increased management credibility
Higher share prices
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20. Corporate Governance
We have already seen the legal requirements concerning reporting on corporate governance, and you must be aware that in Mauritius reporting on Corporate Governance has become mandatory for PIEs since July 2009.
From the ARR exercise, FRC can confirm there is a change in reporting on corporate governance, and most PIEs are complying with the Code on a ‘comply or explain’ principle.
And why they are complying is because there is ….(Slide)

21. Corporate Governance
Increased Awareness that Good Governance Counts - Good governance counts because it makes directors and management more aware of their responsibilities to act in a responsible way to all stakeholders and to provide useful reports and also contributes to corporate effectiveness.
However, there are areas of concern too….
One of the areas of concern is that …
Governance in Name but Not in Spirit - quite a few companies are pushed to improve their governance more by the regulatory bodies than by their own/inner self-discipline mechanism.
The next area of concern is ….
The Development of a Checklist Mentality - people focus too much on compliance and are not talking about matters such as strategy and building a business. Directors are spending more and more time in compliance issues and losing sight of operational issues.
But there is still room for improvement…..
Continue to Focus on the Behavioral and Cultural Aspects of Governance – as the ethical dimension – social, cultural and personal behavior – is fundamentally important throughout the whole corporate reporting supply chain.
Further Improve the Composition of the Board - the best people to oversee management are non-executive directors. Therefore, independence of directors is seen as fundamental to good governance. More independent directors would generally be healthier for governance and making sure that management is ‘doing the good thing.’
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22. Evolution of Corporate Reporting – Where are we going?
Corporate Reporting is not static, it is dynamic. It has gone through various changes as the needs of the stakeholders have changed…..

23. The evolution of corporate reporting
1960
Financial Statements
1980
Management Commentary
Environmental Reporting
Governance and Remuneration
2000
Sustainability Reporting
2020
Integrated Reporting
….and if we go to history, you will see in the 60’s we had only the financial statements.
But with the growth of business activities, changes in demand of stakeholders for more forward looking information corporate reporting has moved from only financial aspect to other requirements such as …… (Slide)……
In the 80’s we had –
Financial Statements;
Management Commentary;
Environmental Reporting; and
Governance and Remuneration.
In 2000, there has been a change from Environmental Reporting to Sustainability Reporting.
The International Integrated Reporting Council (IIRC) is of the view that by 2020 Integrated Reporting would ultimately replace all other forms of corporate reporting and would represent the primary vehicle for communicating with shareholders and other stakeholders.
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24. Demonstrates Stewardship and Creates Value
Integrated Reporting
Demonstrates Stewardship and Creates Value
Financial Statements
Sustainability report
Governance
Strategy
Risks
Prospects
Opportunities
Performance
What is Integrated Reporting?
Integrated Reporting is about connecting information about an organisation’s current decisions with its future prospects.
That is connecting information about strategy, governance, performance, risks, prospects and opportunities in a way that reflects the commercial, social and environmental context within which it operates.
In doing so, it provides a clear and concise representation of how an organisation demonstrates stewardship and how it creates and sustains value.
To enhance corporate reporting, there has been numerous initiatives and consultation around the world - all seeking to effect further change in corporate reporting - these are summarised on the slide.
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25. Integrated Reporting is...
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26. A growing momentum for change
We have integrated reporting, we just mention about it.
Next we have, XBRL which stands for Extensible Business Reporting Language.
XBRL is fast becoming a global standard for the sharing of financial data. Around the world, numerous projects using XBRL are under way. Even in Mauritius, the Companies Division is presently working on this project. The Bank of Mauritius is also coming with this project whereby the financial institutions would be reporting on XBRL.
Then we have the Short Form Report of the Institute of Chartered Accountants of Scotland which offers something different – although the concept is very simple: delivering a clear, concise and consistent message about a company’s past, present and future through a short form report of around 30 pages or less.
The report would describe the business model; the company’s strategy; its key risks and how those risks are mitigated; and would include summary financial information, Key Performance Indicators (KPIs) and the significant judgements made by management in preparing the report.
The full financial statements and the other detailed information – such as governance statements and sustainability information – would remain available to the user and easily searchable on the company’s website.
The BIS consultation has proposed a new reporting framework aiming to address the length and complexity of current reporting to make key information easier to find. It proposes to divide the annual report into: a Strategic Report with key messages about the company (including its strategy, results, risks and remuneration); and an Annual Directors’ Statement, published online, giving the detailed information that underpins the Strategic Report.
This is all about the evolving trends of Corporate Reporting.
Just before ending the presentation, I would like to highlight one of IASB’s projects entitled ‘Disclosure Initiative’. The objective of this project is to improve disclosures.
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27. IFRS disclosures - What is the disclosure problem?
For this project, the IASB carried out a survey among users and preparers of accounts on what they perceived to be the disclosure problem.
The preparers of accounts responded that there is the problem of disclosure overload that is there is too much irrelevant information which dilutes the meaning of the report;
Next, the concept of materiality and its application was a pervasive theme in the survey, and it was cited as contributing to all aspects of the disclosure problem.
With respect to this theme, both the preparers and the users of accounts cited that presently a checklist approach is being adopted and the concept of materiality is not being appropriately applied.
The respondents were of opinion that a checklist results in a lack of appropriate judgement to determine whether information is material or not.
Next, the respondents were of opinion that it is difficult to distinguish the generic from the specific accounting policies. Disclosures should convey the particular flavour that a company actually makes in complying with accounting standards.
In terms of poor communication, the users of accounts cited internal inconsistency and lack of links throughout the entire annual report as key problems.
Source: IASB, FEEDBACK STATEMENT: FINANCIAL REPORTING DISCLOSURE, MAY 2013
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28. Disclosure initiative
Next steps
Disclosure initiative
Short-term steps
Amendments
to IAS 1
Materiality –
assessment
of existing
guidance
Review new
EDs
disclosure
requirements
Long-term steps
Research
project–IAS
1, IAS 7 and
IAS 8 – FSP
project
Review of
existing
Standards
Following the survey, the IASB is taking further steps …
In the short term, we have …..
narrow scope amendments to IAS 1 Presentation of Financial Statements
With respect to the issue relating to materiality - The IASB will consider developing education material or guidance on materiality
With regards to the perceptions that existing Standards prevent judgement - the disclosure requirements in new Exposure Drafts will be drafted using less prescriptive language.
In the long term ….
The IASB will start a research project reviewing IAS 1, IAS 7 Statement of Cash Flows and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The goal will be to replace those Standards, in essence creating a disclosure framework.
Next, there will be a more general review of disclosure requirements— including reconsideration of the Financial Statement Presentation project and a Standard-by-Standard review. The requirements in all Standards will be reviewed systematically, in the light of the revised Conceptual Framework and any work undertaken on IAS 1, IAS 7 and IAS 8.
So, this is an overview of the IASB’s project on Disclosure Initiative.
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29. “If I pick up an annual report and I can’t understand a footnote, I probably won’t – no, I won’t invest in that company because I know that they don’t want me to understand it.”
Warren Buffet
Now, I will end the presentation with the quote of Warren Buffet who once told a student audience,

30. THANK YOU Financial Reporting Council www.frc.mu
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