Mark Hynes: The role and nature of disclosure, investor communication, and IR is changing very fast. New regulation, the changing classes of investor, and the challenges generally facing in-house IR people, are all rising. We wanted to help companies by bringing together a hugely experienced group of people from all sections of the financial community. By sharing views on these challenges, the PRN DAB identifies potential solutions, and uses all forms of media to spread the word.
PRWeek: A new DAB white paper, “Return to Strategy,” says companies should increase transparency by disclosing information about “hidden assets.” What are these assets and what is the purpose of their disclosure?
Hynes: Most assets are physical and their value can be explained in the company's financial accounts. However other assets including the value of brands, the experience of its management, the consistency of its communication, spend on research and development, training of people, are not 'measurable' in the traditional accounting manner. It is precisely in these areas that investors look for value creation, that affects the price of the equity. And analysts look to add a premium to companies' valuation based on these assets. By explaining better the value of these hidden assets, companies will ensure that their companies' equity achieves a fair valuation.
PRWeek: The widespread use of XBRL is on the horizon. What impact do you think it will have on financial reporting?
Hynes: XBRL has the potential to change radically the preparation, filing, and use of corporate reporting information. "Preparation" because companies with multinational subsidiaries submitting financial data to the center for consolidation, will make that task much easier by using a common standard for data integration.
Filing has moved from paper, to text, to html and now to fully computer readable. By using XBRL, companies save time, complexity, and, potentially, cost, in preparing its financial filings.
Investors and those who advise them create a standard financial model, normally in Excel, to create a fully comparable set of financial metrics among peer companies. In the past, this data has been updated into the models manually. XBRL allows users to update their models automatically, making them much more efficient, and hence allowing them to focus more on added value research, to extend the number of companies they follow etc.
PRWeek: How is PRN preparing for XBRL's use?
Hynes: In order for a company to take advantage of XBRL, it needs a one-time dictionary of its accounts to be built, which will then on future occasions automatically produce a tagged version of its numbers. PRN has built partnerships with organizations who offer this sort of service. And PRN is already offering filing solutions, including those in XBRL.
The Expert Q&A column is featured in the weekly Products & Tools newsletter.