Flip side (part 1)

CFO Magazine has previously reported that so-called “disclosure overload” is prompting a major regulatory review of the way financial reports are to be drafted[1]. The article reports that, over the past 20 years, the

“average number of pages in 10-Ks devoted to footnotes and the Management’s Discussion and Analysis…has quadrupled….At that rate, in 20 years companies will be devoting more than 500 pages of their annual reports to footnotes and the MD&A.”

The regulatory concern is that companies are putting in “an avalanche of trivial information” to make sure that they are in complete compliance with all disclosure rules. The goal of the interested regulators[2] is to remove most of this and to present to investors, the nominal audience for these filings, easily read information, but only on significant matters.

Whether or not this is a good idea from the point of view of compliance with the securities and other financial statutes is not something I want to get into. But remember, others, such as those of us involved with competitive intelligence, are also users of these reports.

So keep this in mind: what a corporation may consider to be “trivial information” in the grand context of, say, $6.3 billion of revenues, may be absolutely critical to those of us attempting to do a deep dig on that same business, that is, to its competitors. It is one thing to provide forward-looking information dealing with the impact of currency trading (which should probably be there), and another to pick up the thread of changes in the way research & development or capital investment is now being made and will be made in the future which is included among what regulators consider just “overload”.

Someone’s “trivial information” is someone else’s competitively critical data.

[1] David M. Katz, “Tackling Disclosure Overload”, CFO Magazine, December 2014, pp. 36-9.

[2] US Securities and Exchange Commission, International Accounting Standards Board, and the Financial Accounting Standards Board

 


One Comment on “Flip side (part 1)”

  1. […] In my previous blog on this, I noted a relationship between reducing “trivial” filings and decreasing public access to competitively useful data. […]


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