How can performance reporting frameworks improve the accuracy of financial statements?

1 What are performance reporting frameworks?

Performance reporting frameworks are sets of principles, rules, and guidelines that define how a business should measure, report, and communicate its performance to its stakeholders. Performance reporting frameworks can be mandatory or voluntary, depending on the nature and jurisdiction of the business. For example, IFRS is a global accounting standard that is required or permitted by many countries for public companies, while BSC and IR are management tools that are adopted by some businesses to enhance their strategic planning and stakeholder engagement.

2 Why use performance reporting frameworks?

Performance reporting frameworks can improve the accuracy of financial statements by providing a consistent, transparent, and comparable basis for reporting financial and non-financial information. Performance reporting frameworks can also help businesses to align their performance with their vision, mission, values, and goals, and to communicate their value creation process to their stakeholders. By using performance reporting frameworks, businesses can enhance their credibility, accountability, and reputation in the market, and improve their decision-making, risk management, and innovation capabilities.

3 What are the benefits of IFRS?

IFRS is a widely accepted and recognized accounting standard that aims to provide high-quality, relevant, and reliable financial information to the users of financial statements. IFRS can improve the accuracy of financial statements by promoting uniformity, comparability, and transparency across different countries, industries, and markets. IFRS can also facilitate cross-border transactions, investments, and trade, and reduce the costs and complexities of preparing multiple sets of financial statements for different jurisdictions.

4 What are the challenges of IFRS?

IFRS is not without its challenges, however. IFRS can be complex and difficult to apply, especially for small and medium-sized enterprises (SMEs) that may lack the resources and expertise to comply with the requirements. IFRS can also pose some implementation and interpretation issues, as different countries may have different legal, regulatory, cultural, and economic contexts that affect the adoption and enforcement of IFRS. Moreover, IFRS may not capture all the aspects of a business's performance, such as its social, environmental, and ethical impacts, that may be relevant to some stakeholders.

5 What are the benefits of BSC?

BSC is a strategic management tool that helps businesses to translate their vision and strategy into measurable objectives and indicators across four perspectives: financial, customer, internal process, and learning and growth. BSC can improve the accuracy of financial statements by providing a balanced and comprehensive view of a business's performance, not only in terms of its financial results, but also in terms of its customer satisfaction, operational efficiency, and innovation potential. BSC can also help businesses to align their activities, resources, and incentives with their strategic goals, and to monitor and evaluate their progress and performance.

6 What are the challenges of BSC?

BSC is not a one-size-fits-all solution, however. BSC requires a clear and coherent vision and strategy, as well as a strong commitment and involvement from the top management and the employees. BSC also requires a careful selection and design of the objectives and indicators, as well as a regular and timely collection and analysis of the data. BSC can also be subject to some biases and limitations, such as the difficulty of measuring some intangible and qualitative aspects of performance, the possibility of overemphasizing some perspectives over others, and the risk of creating a rigid and static framework that may not adapt to changing circumstances.

7 What are the benefits of IR?

IR is an emerging reporting tool that aims to provide a concise, integrated, and holistic report of how a business creates value over time for itself and its stakeholders. IR can improve the accuracy of financial statements by incorporating not only the financial capital, but also the other five forms of capital that a business uses and affects: manufactured, intellectual, human, social and relationship, and natural. IR can also help businesses to disclose their strategy, governance, performance, risks, opportunities, and outcomes in relation to their external environment, and to demonstrate their contribution to the sustainable development goals.

8 What are the challenges of IR?

IR is still a relatively new and evolving concept, however. IR faces some challenges in terms of its definition, scope, framework, and assurance. IR can also be challenging to implement, as it requires a significant change in the mindset, culture, and processes of the business, as well as the engagement and collaboration of various internal and external stakeholders. IR can also be difficult to compare and verify, as different businesses may have different approaches and methods of measuring and reporting their value creation.

9 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?