PwC can help get message across

Sep 13 2007 By Bill MacLeod

IN a world where financial reporting has become increasingly complex, the business review legislation provides an opportunity for Aim companies to differentiate themselves and boost investor confidence.

However, despite the business review providing a framework to communicate clearly in a highly competitive market for capital, Aim companies are not taking full advantage of it, according to the latest PricewaterhouseCoopers report.

The report The Business Review and Aim analyses what impact the business review legislation has had on the reporting of Aim companies, for whom it is now mandatory.

It looks at the quality of narrative reporting in their annual reports both before and after the business review came into effect and highlights areas where Aim companies could be looking to improve and strengthen their review.

The report shows that while main market companies are increasingly recognising the
benefits generated by greater transparency of reporting, Aim companies do not appear to be maximising this opportunity to the same extent.

In what is a highly competitive and volatile market, the report shows that there is real scope for Aim companies to present investors with a clearer picture of the performance and future direction of the company.

According to the research, only 54% of Aim companies gave investors a view of the
business and market in which the company operates, compared with 100% of their main market counterparts.

Bill MacLeod, partner and Aim sector leader at PricewaterhouseCoopers, Newcastle, said: “Aim companies should regard the business review not just as yet more regulation but as an opportunity for them to tell their story, give the market an understanding of what they are trying to achieve and as a result, differentiate themselves from their competitors.

“Good narrative reporting in the accounts as covered by the business review is an effective method to get the company’s key messages across clearly and in a way that is easily understood.

“If done well, this can help attract investors and increase investor confidence.”

The report focuses on how four key areas of information in particular were reported: the business environment, company strategy, key performance indicators (KPIs) and identification of principal risks and uncertainties.

While only two of these areas, KPIs and principal risks and uncertainties, are explicit requirements of the business review, the report strongly recommends that a description of the business environment and strategy to compete within that environment are critical in order to put KPIs and risk into context.

For further information, contact Bill MacLeod, assurance partner, PricewaterhouseCoopers, Newcastle on tel: (0191) 269-4037 or email: bill.macleod@uk.pwc.com