The Financial Reporting Lab (‘the Lab’), set up by the Financial Reporting Council (FRC) in the UK, issued the first in a series of releases on the Digital Future and Future Digital Reporting.
It is recognised by the Lab that whilst developments in technology have opened possibilities to enhance the way companies connect with its stakeholders, it is noted that these benefits in financial reporting are not being fully utilised.
In the first of a series of reports, the Lab’s ‘Digital Future’ aims to identify the benefits of new technology and communication devices whilst establishing how companies can maximise such benefits.
In order to discover what is required from a ‘digitally enabled system of corporate reporting’, the Lab sought comments from stakeholders ranging from those preparing reports to those utilising such reports, e.g., current shareholders and potential investors.
In preparing the report, the survey included participants from 14 different countries whilst the Lab interviewed more than 30 companies, analysts, service providers, investors and other stakeholders.
From the findings, three main characteristics of future digital reporting were established:
This stage involves the collation, packaging, amalgamation and presentation of underlying and non-underlying financial information within an organisation. It is necessary for digital financial reporting to be aligned with the current costs of producing reports, to support any necessary reporting requirements and to be compatible with current systems within the organisation.
The process should be user friendly without the need for users to have specialist technical skills to operate and produce the required reports. In order to maximise effectiveness, the digital method should also provide the relevant information in a more prompt fashion than the current system.
The distribution stage refers to the delivery of information and communication with various stakeholders whilst meeting regulatory requirements, e.g., Companies House filings requirements.
It is essential that reporting permits free access to company information and offers national, peer and industry data sets in a format which is easy to use.
Ease and speed of access is also crucial and should provide the ability to find individual data points, disclosure and documents at industry or company level.
The consumption stage focuses on how the information is used and the analysis of same after it has been assembled and distributed. This stage is of most interest to the users of information.
Overall, the information must be contextual, usable, credible and engaging for users in order to maximise its effectiveness.
The Next Phase
The report has laid down the foundations in identifying the features for future digital reporting. In the next phase, the Lab will consider exactly how technology can meet these needs in the future.
The opportunities extend to such technologies as the following in order to establish which of these best fit the framework:
- Virtual Reality – Ability to view the artificial world and interact with virtual landscapes.
- Augmented Reality – Viewing the physical world whilst some elements are computer generated.
- Blockchain – Software for maintaining records across different devices as opposed to one central source.
- XBRL – Labelling financial data.
- Video – Digital video / media stored on devices in a readable format.