Companies told to adopt open financial reporting
Posted Wednesday, October 23 2013 at 01:00
A company’s financial report should be tailored to meet shareholders’ interests.
Companies have been urged to adopt integrated financial reporting to ensure financial stability and business sustainability in the long-run.
Speaking at the ACCA chief financial officers’ (CFO) forum in Kampala yesterday, Mr Grace Kavuma, the Tullow Oil chief executive officer, said due to the changing dynamics globally, companies need to move from the traditional model of reporting and start communicating their financial story to stakeholders in the most transparent way.
“The traditional financial reports constitute a small part of what stakeholders need to know: What has happened has happened and we can’t keep looking back. Stakeholders not only want to know about the profits or losses but are also interested in the whole business.
“How did you make that profit, was it at the expense of people, environment or integrity?” He questioned.
Integrated reporting, according to Mr Kavuma, involves a holistic reporting approach and should be consistent, transparent and tailored to meet shareholders’ interests. This kind of reporting should include things such as human rights, environmental, social and governance issues, among others.
Mr Japheth Katto, the Capital Markets Authority chief executive officer, said mere reporting the financials of a company, turnover, costs and dividends paid is no longer adequate because the world has become more sophisticated and stakeholders are demanding more than just information about a profit or loss. “Stakeholders need to know how the community is benefiting or is being involved and as such, human rights and environmental issues have to be integrated in reporting,” Mr Katto said.
According to Mr Katto, integrated financial reporting is crucial if businesses are to attract investors.
“It’s becoming clear that companies which are doing integrated financial reporting will attract more investment, customers and will be sustainable in the long-run,” he said.
Mr Katto added that the change towards integrated financial reporting model should be spearheaded by CFOs. In his speech, the National Environment Management Authority executive director Tom Okurut urged organisations to conduct responsible businesses to avoid negative interactions with the environment and ensure profitability of their businesses.