Financial Reporting Lab report: how to improve business model reporting

The Financial Reporting Lab has published a report on business model reporting following a project involving 19 companies, 36 investors and two retail shareholders. It sets out the key of good business model disclosure and highlights matters of particular interest to investors. 

The main findings of the report are that:

  • business model information is fundamental to investors' analysis and understanding of a company and a lack of good disclosure on the business model raises concerns over the quality of management;
  • as business model information provides context to the other information in the annual report most investors want it positioned towards the front of the Strategic Report;
  • where a company operates a number of business models, disclosures of each significant business model is desired;
  • investors are looking for better natural linkage of business model information to other sections of the Strategic Report, and consistency with disclosure in the annual report; and
  • investors are looking for more detail than is currently provided by most companies. Information of particular interest to investors includes information on:
  • what the company does and where it sits in the value chain
  • the company's competitive advantage
  • key assets, liabilities, relationships and resources and how they are maintained
  • key revenue and profit drivers and how profits convert to cash.

The Lab report also includes examples of current good practice as well as highlighting how disclosure could be modified to provide more value to investors.

The report can be found here.