The Business Reporting Model of the Future

The Education Supplement will be presenting a series of articles addressing “BAAS,” Business Assurance and Advisory Services. This edition reports on the business reporting model of the future. The following comments are excerpts from an interview with Alan Anderson, Senior Vice President–Member & Public Interests. Future Education Supplements will discuss Performance Measures, XBRL, Trust Services (WebTrust and SysTrust), and Privacy Issues.

What is the business reporting model of the future?
The business reporting model of the future is online, real-time disclosure of business information and it’s performance measurement based. Today’s business reporting, although a solid foundation from which to start, is incomplete due to rising marketplace demands for more relevant, up-to-the-minute information. Users today want “data on demand” in formats that allow quick access and analysis to help make better decisions.

What can CPAs do today to help their clients or employer move toward reliable, online, real-time reporting?
There are five fundamental elements a company needs to have in place in order to provide reliable online, real-time reporting:

Reliable systems.
Common methods of disseminating information.
Industry-specific financial and nonfinancial data.
Corporate accountability, including management integrity and solid enterprise risk management.
Understandable disclosures and information.

Several practice areas can relate to each element. For example: Reliable systems can be achieved through SysTrust. Common methods of disseminating information can be facilitated with XBRL technology. Industry-specific financial and nonfinancial information can be gathered using tools such as Performance View today and, in the not too distant future, the tools that will arise from the Value Measurement and Reporting Collaborative (VMRC) efforts. Corporate accountability can be enhanced with services such as WebTrust Online Privacy and the ASB fraud standard, and in the near future by the outcomes of the COSO Enterprise Risk Management Project, and current AICPA projects on Environmental Reporting and Code of Conduct Audits. Understandable disclosures can be achieved through the FASB Disclosure Project, the SEC Plain English Goals and the VMRC for enhanced value reporting.

Is the new business reporting model moving CPAs away from their traditional roles as auditors?
Providing real-time reporting clearly leverages the traditional audit function that CPAs are providing to protect investors and other interested parties. Today, if you think about a traditional audit report, it says, “Yes, the financial statements that are covered by our report, which took place, in many cases, 60 days ago, are materially correct.” This means that the investing public is relying upon information that is after the fact. They do not know what happened yesterday or last week which, if known, might improve their decision. The assurance around online, real-time information would be more valuable, particularly to the investing public. This would represent a significant enhancement to the audit role CPAs play and a tremendous value to all parties involved in the analysis of the information. Consequently, real-time reporting is a very positive step for protecting the public interest and the role the accounting profession plays in the capital markets.

What is financial versus nonfinancial data?
Financial and nonfinancial data refer to performance measures and other data that will support user needs when determining the true value of a company and its true operating performance. Performance measures can be beneficial to organizations of all sizes. However, many companies are unable to implement proper performance measurement initiatives because they don’t have the skills or the tools needed to create and use them. The AICPA has developed Performance View to help accountants and companies understand performance measurement criteria and methodology. The next logical step in this approach will be reporting on performance measurement efforts within companies using real-time data, possibly using XBRL data elements tied to the general ledger of the company. Through Performance View, accountants can assist a company in identifying financial and nonfinancial measures that best communicate business results, goals and objectives.

The Value Measurement and Reporting Collaborative, in which the AICPA is a participant, will play a crucial role in the new business reporting model. VMRC is a global effort of the accounting profession, along with corporate directors, businesses, business associations and organizations, institutional investors, investment analysts, software companies and academics. The key purpose of the collaborative is to help boards of directors and senior management make better strategic decisions using value measurement and reporting. It is anticipated that the current financial reporting model would, over time, migrate to this new model and would be used to communicate a more complete picture to stakeholders.

Where can CPAs in academia go for additional information on these efforts related to the new business reporting model?
The AICPA will be publishing articles on the topic to its membership and providing regular e-mail alerts on updates related to the issues. For additional information: