Corporate Governance
Financial and non-financial reporting
including IFRS
A financial analyst told Tapestry: “Companies are putting more and more [performance] information out there – more dots, if you will. But not all are good at helping us connect the dots.” While financial reporting has undergone significant changes since the passage of the Sarbanes-Oxley Act of 2002, much remains to be done to improve the quality, relevance, and comparability of financial and non-financial communications that companies provide to the market.
Recognizing their increased responsibility in overseeing this information, audit chairs participating in Tapestry’s networks say audit committees:
- have formalized their role in overseeing financial reports since the passage of Sarbanes-Oxley, and today spend a great deal of their meeting time throughout the year on the form and content of regulatory filings;
- are also now paying special attention to non-audited financial and non-financial communications such as press releases, which they scrutinize for language and tone, guidance, and, in some cases, what is said in analyst calls. Many are questioning whether a more systematic oversight approach to these communications is warranted;
- recognize the successful impact Sarbanes-Oxley has had on improving internal controls over financial reporting and, in some cases, are questioning whether these controls should be extended to non-financial communications such as the management’s disclosure and analysis and the operating review.
Simultaneously, the G-20 has spurred global efforts to establish a single set of high-quality global accounting standards and audit chairs await progress by international standards-setters to converge standards such as IFRS and US GAAP.
While audit chairs understand the goal of improving quality and comparability, they have expressed considerable concern about the convergence process itself, saying the process has thus far exacerbated the reporting problem by lengthening financial reports (leading to less transparency and usability), and caused uncertainty in the use of accounting standards.
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