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Investment Association calls on companies to cease quarterly reporting

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19 Dec 2016

The Investment Association (IA) has issued a Public Position Statement that calls for companies to cease quarterly reporting and “refocus reporting on a broader range of strategic issues”.

In November 2014, the Financial Conduct Authority (FCA) published policy statement PS14/15, which updated the Disclosure and Transparency Rules (DTR) to remove the requirement for companies to publish interim management statements (IMSs).  However companies still choose to prepare such reports. 

The IA indicates that its members see quarterly reporting “as a distraction” which shifts “company resources away from long-term strategic considerations”.  It also states that “apart from the cost and administrative burden of preparing and disseminating quarterly reports, their value to investors is questionable”.  It further states 

When evaluating a company, our members need to be able to assess the health of the business, its growth potential, and the long-term sustainability of its earnings.  The additional resource required to analyse quarterly reports when they are often largely formulaic, or contain excessive redundant information, tends to impact on our member’s ability to do this, and can serve to undermine the trust and confidence between companies and their shareholders which is so essential to long-term value creation. 

The IA also highlights, that in its opinion, ceasing quarterly, although reducing time spent with management teams, will not lead to a deterioration in relationships with those teams but might lead to “a better articulation overall of business strategies, market dynamics, and innovation drivers, which are linked to the key metrics that drive business performance and long-term, shareholder value”. 

The IA therefore indicates that companies should cease quarterly reporting and focus on “improvements in reporting on the long-term drivers of sustainable value creation and shift resources towards improved reporting on long-term strategy and capital management”.  Where companies wish to continue to report quarterly, it calls on them to “publicly explain this position, and how it is relevant to the achievement of their long-term strategy”. 

The full Position Statement is available on the IVIS website.

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