Extending Horizons - KPMG Netherlands Study of Corporate Reporting 2018
STUDY - Looking beyond financial results
The discussion about the future of the reporting model is an active - and global - one and there have been many relevant developments in recent times. KPMG is now adding to this with a study of corporate reporting in The Netherlands. One that is instructive for other countries as well:
'In the Netherlands, longterm value creation is now part of the Dutch corporate governance code. We are also starting to note more analysis of the financial risks and effects on value creation of external impacts, for example as identified by the Taskforce on Climate-related Financial Disclosures with respect to climate change.
In addition, the importance attached to intangible assets (such as brand/ reputation, R&D and innovation) is increasing. Indeed, intangibles today comprise as much as 84% of corporate valuations, compared to just 32% in the mid-eighties. Consequently, there is an increasing difference between the book and market value of companies.
Moreover, in certain industries such as technology and financial services, intangibles have become critical success factors that are a source of competitive advantage. Investors are therefore increasingly looking beyond the financial results of companies and using the performance of intangibles as proxies for the health of a company and its prospects for success over the longerterm.'
Investors need insights in the long-term strategy of companies, to asses how prepared they are to face the future
Editorial board member Lars Kurznack is responsible for long-term value creation at KPMG:
'We found that knowledge of a company's long-term strategy is critical in assessing how well-prepared they are to anticipate future events. Current trends tend to be more disruptive and tend to develop faster. Over 40% of the companies we looked at report on their long-term strategies. Of this group, 42% report on intermediate goals that help to realize this strategy. This boils down to only 16% of all companies. In terms of long-term trends, fewer than half of the companies in our study provide any insight into factors that may affect their chosen strategies. Companies’ revenue models are susceptible to disruptive events such as technological breakthroughs and the availability of raw materials. In this day and age, it is important that companies disclose how these variables influence the way they work over the long term. For instance, by reporting a range of potential scenarios.'
This study of corporate reporting in the Netherlands is based on a wider international methodology that KPMG has developed to analyze corporate reports and which resulted in a global study: Room for Improvement. Derived from this, they have analyzed the results and trends for 23 major non-financial Dutch companies - listed and/or with a turnover of at least EUR 10 billion.