EBR: The Next Step: Enhanced Business Reporting Will Improve Information Quality, Integrity and Transparency

Abstract

EXECUTIVE SUMMARY * ENHANCED BUSINESS REPORTING (EBR) WILL IMPROVE the quality of information companies provide so investors can make better decisions about a company's situation and prospects. The EBR Consortium is leading the effort to improve the quality, integrity and transparency of nonfinancial information. * MEMBERS OF THE EBR CONSORTIUM WILL DEVELOP a voluntary, global disclosure framework for the presentation of the nonfinancial components of business reports, including key performance indicators. The new model's focus won't be on historical information, but on information that delivers a broader view of a company's current and future performance. * EBR WILL HELP COMPANIES BECOME MORE EFFICIENT as the information that management monitors to optimize internal performance begins to form the basis for external reports, subject to reasonable limits for commercially sensitive information. * TWO GROUPS ARE LOOKING AT THE IMPACT OF EBR on public and private companies. The EBR Public Company Task Force has prepared sample reports showing how companies can use EBR and is studying ways to simplify reporting requirements. The AICPA's Private Companies EBR Task Force is looking at similar areas and at ensuring that EBR is scalable for privately held businesses. * THE ACCOUNTING PROFESSION HAS A KEY ROLE to play in protecting the public interest and restoring trust in the financial reporting process. As EBR makes business reporting more transparent, it will strengthen the economy and protect investors. ********** Which of these two drug companies is more valuable to investors and other stakeholders? Company A reported higher earnings every quarter for the past two years. Over the same period, company B invested a greater share of its revenue in research and development. Company B is expecting FDA approval to market a new drug that could improve the quality of life for millions and is working on several other products that could offer immense public and shareholder benefits. If you had to base your decision solely on their financial statements, could you make an informed assessment? Research shows investors, creditors and company executives in fact don't use financial statements as their primary decision-making tool. It also shows a widening gap between market and book value; Roland Burgman of Asset Economics Inc. says 60% of the market value of the Russell 3000 index is attributable to growth expectations. Over time there has been a shift from companies that are predominantly asset-intensive to those that are asset-light and intangible-heavy. These findings demonstrate the need for a better way to document and report on such businesses. Enhanced business reporting (EBR) responds to this need with reports that give all stakeholders the information they need to make better decisions about a company's prospects. With EBR, the focus of communicating data shifts from a snapshot based primarily on financial, historical or lagging information to a model that incorporates both financial and nonfinancial data. EBR delivers a broader view of current performance and a greater understanding of an entity's future. To this end all CPAs-CFOs, financial managers and internal audit directors at companies of all sizes, and external auditors of public and private companies--need to fully understand EBR, how it developed and what it offers. IMPROVED DECISION MAKING The Enhanced Business Reporting Consortium (www.ebrconsortium.org) is leading the effort to improve information used for business decision making. Its mission is to improve the quality, integrity and transparency of information in a cost-effective and time-efficient manner. Members will develop a voluntary, global disclosure framework designed to be the gold standard in business reporting. This framework will provide structure for the presentation of nonfinancial components of business reports--including key performance indicators--and facilitate greater integration of financial and nonfinancial components on an industry-by-industry basis. …