September 30 is just around the corner, which means the latest quarterly reporting season is about to begin. However, the need for quarterly reporting is up for debate again, thanks to US president Donald Trump advocating this month for a shift in the US to semi-annual reporting, subject to approval by the Securities and Exchange Commission (SEC).
Some argue reporting every three months places an unnecessary regulatory burden on companies and encourages short-term thinking, while others raise fears that semi-annual reporting lacks transparency.
Trump had also suggested winding back reporting requirements during his first presidential term in 2018 but this time it seems to be gaining traction.
“This will save money and allow managers to focus on properly running their companies,” Trump said on his social media platform mid-month. “Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!”
SEC chairman Paul Atkins sounds receptive to change. In a TV interview last week, he said in principle, a proposal to change the rules that have been in place since 1970 “would be a good way forward”.
“We’ll consider that, and we’ll move forward after that,” he said on CNBC.
The possible change in the US has triggered discussion across the globe about the value of quarterly reporting and pundits have mixed views. Many cite the tension between transparency and long-term value creation.
While suggesting the re-emergence of the debate could mark the “beginning of the end for compliance as we know it” is perhaps a little extreme, it does pose several further questions.
For example, whether a change would mean companies undertake more long-term thinking, who will benefit from cutting reporting requirements, and whether fewer touchpoints with regulators will make markets safer or erode trust. And beyond quarterly reporting requirements, what regulations might be questioned next?
Evidently, semi-annual reporting is working in various other jurisdictions. The UK moved to quarterly reporting in 2007, then switched back to semi-annual in 2014. Likewise, the European Union introduced quarterly reporting in 2004 but returned to semi-annual reporting in 2013.
In Australia, financial reporting on the ASX is required on a half-yearly and annual basis. But certain companies admitted under the assets test, and mining and oil and gas exploration companies, are also required to file quarterly activities reports and cash flow statements.
These requirements are longstanding and there’s no change in sight.
An ASX spokesperson said the reporting obligations assist the market in assessing whether these entities are meeting their stated business objectives.
“ASX’s quarterly reporting obligations are more limited than those in some other jurisdictions, such as the United States,” the spokesperson said.
“There are no current consultations covering changes to these reporting requirements.”
And so the scrutineering season looms.
