Financial reports too confusing for average investor, corporate officers say

Most corporate financial officers think that financial reports are too confusing for the average investor, but in-depth disclosure about a firm’s strategies and opportunities would be helpful, a new survey found.

The online survey was conducted by Grant Thornton LLP, a Chicago audit, tax and advisory firm, from March 23 through April 3. It included 530 chief financial officers and senior comptrollers.

Most of the firms involved, or 82%, were private companies and 65% had less than $100 million in revenue.

Of the respondents, 72% said that financial reports were too complex for the average investor, and 85% said that companies should supplement those financial statements with key performance indicators.

Key performance indicators vary among industries, but generally include historical information and other data that drill deeper into a company’s strategies and identify trends, said Mike Krzus, a partner at Grant Thornton and president of the Enhanced Business Reporting Consortium in Washington, of which Grant Thornton is a founding member.

“It’s the kind of information that investors and companies actually use to make decisions,” he said.

Although some of this information may already be disclosed in filings with the Securities and Exchange Commission, much of it isn’t specifically mandated, Mr. Krzus said.

The survey found that 54% of respondents said that they didn’t provide this information, while 46% said that they did.

“Also, in some cases the information provided is not uniform within industry sectors,” Mr. Krzus said.

The Enhanced Business Reporting Consortium is collaborating with Gartner Inc., a Stamford, Conn.-based information technology research and advisory firm, in an effort to create uniform industry reporting standards. The consortium is planning its first focus group for next month with companies in the technology sector, Mr. Krzus said.