Corporations should adopt a standard template for reporting quarterly earnings to dispel capital markets short-termism corporate and investment decision-making based on short-term earnings expectations that interfere with the creation of long-term value, according to a joint report by the CFA Institute Centre for Financial Market Integrity and the Business Roundtable Institute for Corporate Ethics.
The two organizations developed the template, which they detail in their report Apples to Apples: A Template for Reporting Quarterly Earnings. The report is available on their websites, http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2007.n1.4561 and www.darden.edu/corporate-ethics/.
As the quarterly reporting process stands today, we fear that too many investors make short-term trading bets based on headline numbers, Kurt Schacht, managing director of the CFA Institute Centre for Financial Market Integrity and a co-author of the report, said in a statement. The recommendations improve the clarity of reporting, without materially increasing reporting expense. When the SEC adopted (Regulation G, effective 2003), it directed companies to be clear and reconcile any non-GAAP numbers they report to the most directly comparable GAAP financial measures.