CORPORATE REPORTING

PRACTICES
IN INDIA

Ar.CLARANCE DSILVA
PROJECT WORKS
29 September, 2017
INTRODUCTION
Corporate Reporting is considered to be a core
business intelligence program

It Allows organizations to easily access, format, and

deliver information
To
1. Employees,
2. Customers, and
3. Stakeholders

Building and maintaining trust is now, more challenging.

It is essential what customers, suppliers, employees, governments and society in

general expect from business and hence, the communication is important.

The procedure adopted by the companies to present their state of affairs to the
external world is known as Corporate Reporting. According to Stittle, corporate
reporting is a vital means by which a company communicates its corporate
message to shareholders, debenture holders, creditors, the media and the world at
large. Corporate Reporting is also known as External Reporting
because the state of affairs of the business which is known to the management only
is brought to light before the public by the use of certain medium. Corporate
Reporting or External Reporting has two parts namely, Financial Reporting and
Social Reporting.
AREAS OF REPORTING

Integrated reporting
Integrated reporting is about connecting information about an
organizations current decisions with its future prospects; connecting
information about strategy, risk, remuneration and performance; and
recognizing that the economy, environment and society are inseparable
and therefore information provided to understand an organizations
performance in each of these areas needs to be viewed as part of a
whole. Integrated reporting helps boards of directors to see the issues
they face more clearly, and enables them to explain their business
rationale to stakeholders with greater clarity and authority.

Financial reporting
At the core of the corporate reporting model is the financial reporting
model, consisting of financial statements and accompanying notes that
comply with generally accepted accounting principles (GAAP).

Corporate governance
The processes by which companies are directed and controlled. Levels of
disclosure differ worldwide but might include information on board
composition and development, accountability and audit and relations
with shareholders.

Executive remuneration
How executives are rewarded, both in the short and longer-term, for
delivering their companys strategic objectives.

Corporate responsibility
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
Narrative reporting is shorthand for the critical contextual and non-
financial information that is reported alongside financial information to
provide a broader, more meaningful understanding of a company's
business, its market position, strategy, performance and future
prospects. It includes quantified metrics for these areas.
CORPORATE REPORTING FRAMEWORK

DIFFERENCE BETWEEN STAKEHOLDERS

AND A CUSTOMER
A stakeholder is an individual, group, or organization who is affected by the
outcome of a product or service and possibly involved in doing the work. Anyone
associated with the project either directly or indirectly can consider themselves a
stakeholder. Not all stakeholders are created equal and different stakeholders have
varying levels of involvement or say in decision making. In education, a stakeholder
could be anyone from a local business to a private donor, taxpayer, or government
organization. Remember, anyone who decides they're a stakeholder is one.

A customer, on the other hand, is an individual who receives or purchases a

product or service. A customer also has (or should have) the ability to buy or rate
this product or service. Such feedback (or voice of the customer) is then frequently
used to improve organizational processes and set requirements. Every organization
has customers, and without them, most organizations would not exist. In
education, parents, students, businesses, local taxpayers, bus drivers, teachers,
principals and other school staff are all customers.
BENEFITS OF CORPORATE REPORTING

INVESTORS Determine whether they should buy, hold or sell

SHAREHOLDERS Assess management stewardship

EMPLOYEES Stability & Profitability of employers

LENDERS Assess whether their loans will be paid when due

SUPPLIERS Assess amounts owned to them will be paid

CUSTOMERS Continuance of an enterprise

GOV. AUTHORITIES
Regulation of activities of enterprises

PUBLIC Contribution to the local economy

NEED FOR A REGULATORY FRAMEWORK

Collapse of certain high profile companies in the recent have raised genuine
concern among the stakeholders and the society at large about the way the
companies are being administered.

This triggered the concept of Good Governance to enter into the platform
of company form of business.

Consequently, recommendations of certain committees to improve company

administration have brought about changes in the regulatory framework
in India.

A regulatory framework for the preparation of financial statements is necessary for a

number of reasons:

To ensure that the needs of the users of financial statements are met with at least a basic
minimum of information.

To ensure that all the information provided in the relevant economic arena is both
comparable and consistent. Given the growth in multinational companies and global
investment this arena is an increasing international one.

To increase users' confidence in the financial reporting process.

To regulate the behaviour of companies and directors towards their investors.

Financial reporting standards on their own would not be sufficient to achieve these aims.
In addition there must be some legal and market-based regulation.
IMPORTANCE OF ANNUAL REPORTS

Transparency, being one of the important requisites of Good Corporate

Governance, is achieved if documents such as the Annual Reports are
prepared providing comprehensive and accurate information about the
affairs of the company without concealment or exaggeration.

This is in fact why disclosures in the Annual Reports are a powerful medium as
these provide indicators about the affairs of the company on the basis of which
discussions are conducted and critical decisions are made in presence of the
shareholders.

This finally determines the future of the company in particular and the
corporate sector in general.

Following benefits arrive out of annual reports:

a) It makes Economic Decision Making easy.

b) It can bring favorable impact on companys Cost of Capital because

adequate disclosure practice can enhance the market price of the
companys shares.

c) Adequate disclosures have the tendency to minimize the fluctuations in

the companys share prices and hence can bring in equilibrium in the
prices of shares.

d) Apart from the above, the decisions of employees, customers and

management will show prudence if disclosures in a financial report is
adequate.
DISCLOSURES

Disclosure simply means to reveal facts and information.

In terms of corporate reporting, disclosure denotes to the mentioning and clarifying

some information of financial or non-financial, figurative or non-figurative in
nature so that the persons interested in such facts and figures get the required
information for arriving at a decision.

This is because it is relatively easy and more source of information, it creates

confidence among the public as the report contains audited financial statements

Stress upon adequate disclosure in the corporate reporting practice in India started
at the end of 1990s or the beginning of the new millennium year 2000. This
initiation came up with the concept of good corporate governance. The
experience of the fall of corporate giants like Enron has taught a lesson that there is
certain lacking on the managements part in the governance of the companies. One
such lacking is being identified in transparency factor in the corporate reporting
practice. This has put the issue of disclosure practice of material facts through the
annual reports to thorough review and to frame rules towards disclosure practice.

Accounts are regarded as the language of business by which it communicates about

the financial affairs of the enterprise. It is a service activity as it provides with
financial facts about the business. Such a service should have desired qualities to
serve its users the best. Considering this fact, there is a constant effort to improve
the reporting practice.
COMPARITIVE ANALYSIS

An Annual Report for the following cement companies is an important means of conveying the
corporate message to the external persons

It is a reliable mode of communication on behalf of a company.

Hence, annual reports should be prepared in a manner that satisfies the qualitative characteristics
of accounting information.

A comparative analysis has been made between the following cement companies in India

1.ACC cement 2. Ambuja Cement

Annual Reports are the published reports containing financial statements, other
reports, some analysis and other facts of non-financial nature. These are available in printed
book form and also now-a-days as soft copies at the websites of the companies.

These are prepared at the end of each financial year and distributed to the members
(shareholders) and other persons related to the business. Now-a-days, a copy of the report is
also sent to the Stock Exchange where the shares of the company are listed under the SEBI
requirements.

These are prepared and presented by the Directors at the Annual General Meeting (AGM) of the
business.

An Annual Report is an important means of conveying the corporate message to

the external persons.
OBJECTIVES OF THE STUDY

The present study has been undertaken to fulfill the following specific objectives:-

a) To examine the provisions of legal and other requirements (directors speech,

connecting with the common man) for Corporate Annual Reports and their
compliance by listed Indian Companies.

b) b) To analyze the disclosure practices followed by the selected Companies.

c) c) To review the application of accounting standards and legibility for the

common man to understand the commercials of a company

d) d) To examine the practices of Extended Corporate Reporting (ECR) by the

Companies. (sustainability, added initiatives)
METHODOLOGIES ADOPTED FOR ANALYSIS OF DATA

The study is being conducted mainly by the observations of corporate reporting practices in
the Annual Reports of the sample companies. For this purpose, the following methods are
applied:

Three of the total 8 parameters are taken for the study on the basis of importance. These
parameters are as follows:

i. Chairmans Speech
ii. Directors Report
iii. Management Discussion and Analysis Report
iv. Corporate Governance Report
v. Auditors Report
vi. Financial Statements & Schedules
vii. Accounting Standards AS 1 Disclosure of Accounting Principles AS 2 Valuation of
Inventory AS 3 Cash Flow Statement AS 22 Accounting for Taxes on Income
viii. Voluntary Disclosures

REVIEW OF LITERATURE
For the purpose of the present study, research-based articles as available in various
journals are studied. Books on corporate disclosure practices and edited books
published having articles on corporate reporting practices and books on accounting,
auditing and accounting standards are also studied. Further, information and
literature available through internet is studied for this research work. Following
paragraphs highlight the findings of review under two distinct heads
International Perspective and
Indian Perspective:
CHAIRMANS SPEECH

Here, the Chairmans Speech has four
main parts:
Companys achievements
Appraisal of support and help received
from the members
Threats experienced by the Company
and means adopted in overcoming of the
threats
Expectation note of support.
Here, the Chairmans Speech also has
four main parts:
Companys accomplishments and
delivered promises
Highlights of the previous year
both positive and the hardships
Heartfelt gratitude for the extended
support
Expectation note of support.

The reality is that the chairman statement is not an obligatory financial requirement,
hence, it has been noted that companies describe it by various names and companies
have included varying information. A clear lack of consistency has been noted throughout.
For example financial performance has been termed financial highlight, group results, and
financial review. Prospects has been branded company outlook, moving ahead, challenges
ahead, year or years ahead. Overview was categorised in two: internal and external.

An in-depth analysis was then performed on each companys chairman statement and the
chosen features of the chairman statement were monitored. The financial statements of
each company were also appraised based on their net income and revenue
STATISTICAL DATA

The graphs above show a very transparent picture of how much tax does the company pay. It makes
the person investing his money in the company feel proud about the fact that the company pays taxes
without any malpractice.

There have been instances where companies like unitech have duped the government and have been
involved with land disputes which created concerns in the mind of the investors.
COST & PROFIT AS A PERCENTAGE OF REVENUE
FROM OPERATIONS

The pie charts above are very legible and easy for the lay man to understand. It fairly shows
the areas in which their companies are investing money.
INFERENCES ON THE ANNUAL REPORT

Corporate reporting practices are vital means by which a company

communicates its corporate message to shareholders, debenture
holders, creditors, the media and the world at large

The state of affairs of the business which is known to the

management only is brought to light before the public by the
use of certain medium

Investment Decision-making: This indicates provision of

information useful to the investors, creditors and other
users in making proper investment decisions.

Management Accountability and reliability :

This means to provide information on
management accountability to judge
managements effectiveness in utilizing the
resources and running the enterprises.
PROBLEM STATEMENT

COMPLEXITY is unavoidable in todays ever more complicated and sophisticated

business environment.

Much of the complexity in corporate reporting, however, is created by the sheer volume
of disclosure.

The solution? Thoughtful reduction to achieve simplicity.

It is imperative to understand that the annual reports are going to be reviewed by a cross
section of the society who have different views about the purpose and value of
corporate reporting, especially annual reports.

From the above it can be observed that there are different laws, guidelines and
principles governing disclosure in an annual report of a company. These rules are
mandates to be followed in the reporting of financial and non-financial information
to the public. The present study is undertaken to meet this necessity.
EXAMPLE OF TYPICAL ANNUAL REPORT
LATENT SOLUTIONS
1. Cutting clutter to simplify communication

Lets look at one area that can prevent investors from being
buried in an avalanche of information.

And that is cutting clutter, especially in governance and

risk management sections, which are both big contributors
to boilerplate and other explanatory information.

It takes real determination to shift the reporting focus from compliance

to end users by looking for simple, elegant ways to communicate.

However, it is more beneficial in the long run because investors

actually bother to decipher the annual reports.
LATENT SOLUTIONS

2. Filter out the noise

One reason investors dont read annual reports is that they are filled with
legal, accounting and technical jargon.

Consequently, it takes investors too long to find and extract relevant

information.

3. Highlight only the relevant information

A simple language of the notes to the financial statements, managements

discussion and analysis, is essential to cut jargon and length. This helps
most people to not find reading an annual report a tedious exercise

Find ways to highlight whats new or changed from the previous year.
PARAMETERS FOR AN IDEAL ANNUAL REPORT

If designed well and presented in the right format, annual reports are a great
way to present company milestones from the previous year, as well as highlight
your company's unique culture

Engage stakeholders and win loyal fans

Highlight growing numbers and other key information

Rather than stick with a single way to display each point, use a combination of
readable graphs, looping animations, linked images, and a timeline of
events to communicate engaging information.

The interactive annual report from this quickly growing e-commerce

business.

Social responsibility data for companies with environmentally or socially

sensitive operations.
 ELEMENTS IN AN ANNUAL REPORT

1) Vision and mission statements of the company

Vision: "We will be a globally respected corporation."

Mission: "Strategic Partnerships for Building Tomorrows Enterprise."

2) Corporate information
Details of directors, bankers, auditors and registered and corporate office

3) Products overview and financial highlights in last 5 to 10 years

Details of products being manufactured by a company, segment wise

performance in last two years, key raw materials consumed

4) Directors report
This section provides brief summary on financials, explanation of the financial results,
key developments in the company. Also, take care of the tone of the director report while
making an annual report.

5) Brief Management discussion and analysis (MDA)

This section provides information on trends in the industry, SWOT analysis of the company,
insights on key line items of financial statements and risk factors/concerns affecting the
company performance.

6) Brief Information on shares of the company

This section provides information on historical performance of share price, share holding
pattern of the company, pledging of shares by promoters during the year, split of shares, bonus
shares distributed, etc.

7) Financial statements

This section provides detailed information on profit and loss accounts (income statement),
balance sheet as on year end, cash flow statement and schedules of the financials for two
years.
FUTURE OF CORPORATE REPORTING

The future of corporate reporting is a subject attracting much attention of late. In this
presentation we take stock of where corporate reporting stands at present and identify the
key decisions that need to be taken before a step change in the quality and usefulness of
reports can be achieved

Future annual reports need to understand how corporate reporting needs to

adapt to economic reality and stakeholder expectations.

We need to see technology not only as an enabler of change, but also as a driver.
Online and automated reporting is the future, as this will affect the experiences and
expectations of end users and the entities themselves.

In October of 2015 Accountancy Europe at that time, the Federation of European Accountants
issued a discussion paper entitled The Future of Corporate Reporting creating the dynamics
for change. It questions how corporate reporting needs to adapt to economic reality and
stakeholder expectations. The discussion it generated has been incredibly fruitful and
encouraging

The feedback has been summarised andcollected and our expected next steps in a short Follow-
up piece, where you can also find quotes from some of the respondents. The overall message
was clear: the debate demands to be pursued, and some of the concepts put forward need to be
developed.
CORE & MORE

Idea called CORE & MORE envisages an executive summary of the most
relevant and material information (CORE) supported by more detailed
reports which address specific audiences (MORE).

The CORE report would contain the key information that is important for obtaining
a fair understanding of the key elements of the companys affairs, the key financial
results and additional information that is considered to be relevant and material for
the companys stakeholders.

The MORE report(s) would include more detailed information, for example
detailed disclosures for financial statements or additional information that would
be of a wider range than that in the CORE report.

The book argues that the approach - especially when combined with an efficient use
of modern technology - would allow for more timely presentation of information,
would give companies the possibility to update individual elements without affecting
the other parts, and could be used by stakeholders to tailor the information
presented to their own information needs.
INFERENCES

Reporting practice is not static; it can always be improved, and needs to adapt
to the constantly changing business and regulatory environment.

As an investor, people dont need to read the annual report like a novel
from cover to cover.

Instead, make it simpler for people to approach it like a newspaper and

jump around to the relevant sections to get the answers they need to
decide whether to buy or hold on to the stock.

Digital reporting practices should be promoted.

Minimal Bulletins with Hyperlinks to encased information is the way to go

for the future of corporate reporting in this Digital Era