Think Tanks Urge Standardized U.S. Quarterly Reports
Two influential think tanks recommended that U.S. companies adopt a standard template for announcing quarterly earnings, saying clearer financial information would help stem short-term trading bets that might miss the big picture.
The report from the Business Roundtable Institute for Corporate Ethics, comprised of U.S. business and academic leaders, and the CFA Centre for Financial Market Integrity asks that companies go beyond government regulations and standardize the way quarterly earnings reports are disseminated.
Titled "Apples to Apples: A Template for Reporting Quarterly Earnings," the report asks companies to clearly give quarterly bottom-line per share figures and earnings and to include a concise table explaining how each given figure is calculated.
While companies are required by the government to include certain information in their quarterly earnings releases, often the information is obscured by a myriad of other data, making it difficult to find.
The report recommends companies include a table at the top of quarterly earnings press releases and place information consistently in the same place.
"They are ghastly and they are very, very inconsistent and this report is designed to clarify that," said Kurt Schacht, managing director of the CFA, which represents analysts and portfolio managers.
"You find yourself culling through 85 pages of spin about why you should be paying attention to the non-GAAP information and why everything else is one-time items to where you find the actual GAAP (generally accepted accounting principles) reconciliation."
Schacht said the report's recommendations are meant to be applied to informal quarterly earnings releases, often issued weeks before formal filings are made with the U.S. Securities and Exchange Commission.
The Financial Accounting Standards Board, which sets U.S. accounting rules, has also been working on a financial statement presentation project which aims to create a common standard for displaying company financials. The project, which began in 2004, is being run jointly with the International Accounting Standards Board.
The recommendations follow a report last year by the two think tanks suggesting that companies stop providing quarterly forecasts on future performance and instead develop more long-term incentives for executives and provide more frequent updates on strategy or other long-term growth drivers.