CICA Research Study

Corporate Reporting
to Stakeholders
June 2008

Insights for a Changing World

Corporate Reporting to Stakeholders
OTHER RESEARCH REPORTS AND RESEARCH STUDIES
* Limited Audit Engagements and the Expression of Negative Assurance (1980)
* Extent of Audit Testing (1980)
* Accounting for Pension Costs and Liabilities (1980)
* Analytical Review (1983)
* Accounting for Portfolio Investments (1984)
Financial Statements for Pension Plan Participants (1984)
* Pension Plan Auditing (1984)
* Financial Reporting by Credit Unions (1984)
* Materiality: the Concept and its Application to Auditing (1985)
* Local Government Financial Reporting (1985)
* Accounting and Financial Reporting by Agricultural Producers (1986)
* Accounting and Reporting by Venture Capital Organizations (1987)
* Professional Judgment in Financial Reporting (1988)
* Incorporating the Time Value of Money within Financial Accounting (1988)
* Accounting and Financial Reporting by Junior Mining Companies (1988)
* Accounting and Reporting Physical Assets by Governments (1989)
* The Financial Statement Presentation of Corporate Financing Activities (1989)
Approaches to Dealing with Risk and Uncertainty (1990)
Reporting the Effects of Changing Prices: A Review of the Experience with Section 4510 (1990)
The “Going Concern” Assumption: Accounting and Auditing Implications (1991)
Interim Financial Reporting: A Continuous Process (1991)
* Information to be Included in the Annual Report to Shareholders (1991)
* Value-for-Money Audit Evidence (1991)
Environmental Auditing and the Role of the Accounting Profession (1992)
* Financial Reporting for Segments (1992)
Environmental Costs and Liabilities: Accounting and Financial Reporting Issues (1993)
Using Ratios and Graphics in Financial Reporting (1993)
Professional Judgment and the Auditor (1995)
Accounting and Reporting for Enterprises in the Development Stage (1996)
Financial Reporting by Canadian School Boards (1996)
Indicators of Government Financial Condition (1997)
Financial Reporting by Investment Funds (1997)
Full Cost Accounting from an Environmental Perspective (1997)
Costing Government Services for Improved Performance Measurement and Accountability (1999)
Continuous Auditing (1999)
Financial Reporting by Small Business Enterprises (1999)
* The Impact of Technology on Financial and Business Reporting (1999)
Use of Specialists in Assurance Engagements (2000)
Assessing Risks & Controls of Investment Funds (2000)
Audit Enquiry: Seeking More Reliable Evidence from Audit Enquiry (2000)
Financial Reporting by Rate-Regulated Enterprises (2002)
Accounting for Infrastructure in the Public Sector (2002)
Electronic Audit Evidence (2003)
Stakeholder Relationships, Social Capital & Business Value (2003)
Accounting Bases Used in Canadian Government Budgeting (2004)
* Electronic Filing and Reporting: Emerging Technologies and Their Implications (2005)
Secure IT Infrastructure for E-commerce (2005)
* Interactive Data — Building XBRL Into Accounting Information Systems (2007)

*Research Study
 CICA Research Study

Corporate Reporting
to Stakeholders
June 2008

Insights for a Changing World

Notice to Reader
The CICA commissioned this Research Study as part of its continuing knowledge
development program. The views and conclusions expressed in this publication are those
of the Study Group. They have not been adopted, endorsed, approved, disapproved or
otherwise acted upon by a Board, Committee, the governing body or membership of the
CICA or any provincial Institute / Ordre.

The CICA Research Study Corporate Reporting to Stakeholders

and the accompanying Highlights booklet are available
on the Internet (www.cica.ca/crs).

Library and Archives Canada Cataloguing in Publication

Corporate reporting to stakeholders / Canadian Institute of Chartered Accountants.

(CICA research study)

ISBN 978-1-55385-347-3

1. Corporations--Canada--Accounting. 2. Corporation reports--Canada.

3. Financial statements--Canada. 4. Disclosure of information--Canada.
5. Corporations--Investor relations--Canada. I. Canadian Institute of Chartered
Accountants II. Series: Research study (Canadian Institute of Chartered Accountants)

HF5686.C7C675 2008 658.15’12 C2008-902662-4

Copyright © 2008
The Canadian Institute of Chartered Accountants
277 Wellington Street West
Toronto, ON, Canada M5V 3H2

Disponible en français
www.icca.ca
Foreword
For 56 years, the CICA Corporate Reporting Awards program has rewarded
excellence in corporate reporting. Over the years, the interests of stakeholders have
changed and widened and, currently, they are zeroing in on corporate governance
disclosure, sustainability reporting and electronic disclosure. Expectations of
transparency are also increasing, and the awards recognize that a company can be
an example of excellence in corporate reporting only if it shows best practices in all
of these areas.

Until the early 1990s, the focus was on annual reports. While the hardcover annual
report remains a cornerstone of the awards program, judges are also looking at
interim reports, MD&A, website disclosures and earnings press releases. To take
the new disclosures into account, the annual reporting category is now known as
the financial reporting category.

In 1991, the CICA published the Research Study Information to be included in the
Annual Report to Shareholders. That study discussed the objectives of the annual
report and, to help achieve those objectives, recommended what information it
should provide in addition to the financial statements. The continued, widespread
use of annual reports in performance reporting prompted the need to revise the
guidance contained in the original study. A Study Group comprising current and
former judges of the awards program was established for that purpose.

The Study Group’s terms of reference were to:

• assess the main objectives of corporate reporting to stakeholders;
• consider the perceived information needs of the primary users of corporate
reports in terms of a company’s past, present and future activities;
• survey current corporate reporting practices and regulations in Canada and
elsewhere;
• propose what information is needed in corporate reports, beyond the financial
statements, to assist users in interpreting a company’s financial condition,
results of operations and financing and investing activities; and
• provide guidance on the presentation of such information in corporate
reporting to stakeholders.

The Study Group’s efforts produced this Research Study and an accompanying
Highlights booklet, both of which address corporate reporting to stakeholders on
a continuous basis.
The CICA expresses its appreciation to Jerry Trites, FCA, and the members of the Study
Group for the time and effort spent in completing this project. Equally appreciated is the
work of Paul-Émile Roy, CA, who directed the research and drafted the research study.

The views expressed in this publication are those of the Study Group and have not been
formally endorsed by the CICA. Comments are welcome and should be addressed to J. Paul-
Émile Roy, CA, Principal, Research Studies Department, CICA (research.studies@cica.ca).

Toronto, June 2008 CICA Research Studies

Corporate Reporting to Stakeholders

Study Group
Jerry Trites, FCA (Chair) Corinna King, CA
Zorba Research Inc., Heatherton, NS Gryphon Petroleum Corp., Calgary

Aline Girard, PhD, CA Tracy Lutz

HEC Montréal, Montréal Keystone Investor Relations Inc., Calgary

Tim Herrod, CA Arti Nagpal, MBA

Potash Corporation of Saskatchewan Inc., Financial Consultant, Richmond Hill
Saskatoon
Alex Young, CA
PricewaterhouseCoopers LLP, Mississauga

CICA Staff
Paul-Émile Roy, CA
Principal, Research Studies Department
Knowledge Development Group

David L. Pollard, CA
Vice President
Knowledge Development Group
 Table of Contents
Page

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Chapter

1 Introduction
Purpose and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
About Corporate Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Corporate Reporting Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2 Objectives of Corporate Reporting

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Communicating Useful Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Timeliness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Understandability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Comparability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Uses for Corporate Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purpose of Corporate Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

3 Stakeholders and Their Information Needs

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Overview of Stakeholder Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Primary Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Secondary Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Canadian Shareholder Profile and Attitudes . . . . . . . . . . . . . . . . . . . . . . . . 20
Sources of Information and Investment Advice . . . . . . . . . . . . . . . . . . . . 21
Users’ Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Information Needs of Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Chapter Page

4 Framework for Corporate Reporting

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Surveying Current Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Proposing a Framework for Corporate Reporting . . . . . . . . . . . . . . . . . . . . . . 30
Assessing the Relevance of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

5 Corporate Overview — Part A
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
A1 — Corporate Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
A2 — Corporate Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
A3 — Products, Services and Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
A4 — Company Ownership and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
A5 — Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
A6 — Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
A7 — Management Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
A8 — Comparative Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
A9 — President/CEO Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
A10 — Commentary on Industry and Economy . . . . . . . . . . . . . . . . . . . . . . . . 44
A11 — Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

6 Corporate Social Responsibilities — Part B

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
B1 — Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
B2 — Social Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
B3 — Environmental Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

7 Review of Operations — Part C
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
C1 — Overall Review and Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
C2 — Segment Review of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
C3 — Production Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
C4 — Competitive Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
C5 — Response to Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
C6 — Forward-looking Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
C7 — Risks and Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
C8 — Financial and Operating Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
C9 — Performance Compared to Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 69
C10 — Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
C11 — Significant Agreements and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 71
C12 — Industry Specific Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Chapter Page

8 Financial Summary and Analysis — Part D

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
D1 — Analysis of Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
D2 — Segment Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
D3 — Analysis of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
D4 — Capital Investments and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 81
D5 — Analysis of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
D6 — Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
D7 — Quarterly Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
D8 — Accounting Policy Changes Not Yet Implemented . . . . . . . . . . . . . . . . . . 85
D9 — Statement of Management’s Responsibility . . . . . . . . . . . . . . . . . . . . . . 86
D10 — Financial Statements / Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . 87
D11 — Historical Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
D12 — Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
D13 — Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

9 Supplementary Information — Part E
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
E1 — Table of Contents / Navigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
E2 — Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
E3 — Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
E4 — Shareholder and Investor Information . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

10 Enhancing Corporate Reporting

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Effective Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
General Readability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Delivering Key Messages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Communicating Effectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Disclosing Essential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Areas for Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Chapter Page

11 Summary Corporate Reporting

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Reviewing the Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Information Overload . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Complexity in Standards and Regulations . . . . . . . . . . . . . . . . . . . . . . . 117
Surveying Current Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Corporate Reporting Formats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Summary Reporting Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Corporate Reporting Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Facing the Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Preparing a Summary Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Future of Corporate Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

12 Corporate Reporting on the Internet

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Reviewing the Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Surveying Corporate Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Survey of Information Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Analysis of Essential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Use of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Facing the Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Future of the Online Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Website Information Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Effective Use of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

Appendices
A List of Survey Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
B Annual Report Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
C Guidelines for Corporate Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
D Corporate Website Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
E Overview of Narrative Reporting Requirements . . . . . . . . . . . . . . . . . . . . 175
F Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

Selected Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

 Executive Summary
Corporate reporting in
Canada has changed
dramatically since
the CICA Corporate
Reporting Awards (CRA)
program was launched
in 1951. At one time, the
annual report was the
only vehicle companies
used to communicate
with shareholders.
Now, investors and
other stakeholders are
shifting their focus to the
corporate website, which
is becoming the primary
medium for communicating
corporate financial and
business information.
Although reporting
continues to evolve, the
fundamental importance
of accountability and
transparency has not
changed.
To provide clear guidance on the information needs of
the primary users — investors — the CICA commissioned
this comprehensive Research Study about all aspects of
Corporate Reporting to Stakeholders. The study, prepared
by current and former CRA judges, is based on an in-depth
review of the annual reports and websites of 125 companies
that have participated in the CRA program.
This new study examines practices and significant trends in
corporate reporting by analyzing:
• more than 50 different types of information disclosed in
2004-2005 annual reports;
• major changes in the 2004, 2005 and 2006 annual reports
of award-winning companies;
• information content, presentation and navigation on
company websites in 2007.
The aim of this Research Study is to promote effective
communication between a company and its stakeholders by
providing useful guidance to preparers of corporate reports.
The study shows that electronic disclosure and web-based
reporting of both financial and non-financial information is now
commonplace. With the rapid advancement of information
technology and related technologies, such as XBRL (eXtensible
Business Reporting Language), companies are adopting
new means of communicating with investors and other
stakeholders. For example, information is being delivered
online in the form of corporate news, quarterly earnings
releases, annual reports, audio and/or video conferencing
and e-mail alerts. Together, companies and stakeholders are
shifting to a new paradigm — real-time online reporting.
Corporate Reporting to Stakeholders
 Chapter 1
Introduction
Corporate reporting
refers to the process used
to communicate with
stakeholders, regardless
of the vehicle used for
such communications. It
reflects the messages that
management needs to
convey to investors and
other stakeholders, taking
into consideration generally
accepted accounting
principles for financial
reporting and relevant
regulatory requirements.
Stakeholders are individuals
or groups that may be
significantly affected by
a company’s activities,
products and services or
whose actions can affect
the company’s ability to
successfully implement its
strategies and achieve it
objectives.
PURPOSE AND METHODOLOGY
The primary purpose of this Research Study is to promote
effective communication by providing helpful guidance
for comprehensive and integrated corporate reporting. A
secondary purpose is to suggest how useful information can
be communicated. Although the research focuses primarily
on information disclosures in corporate annual reports and on
company websites, the analyses carried out also largely apply
to corporate reporting overall.
The Study Group recognizes the key role of corporate
reporting in global capital markets and, therefore, examines
the objectives of corporate reporting and information that
should be provided to assist in effectively achieving those
objectives (see Chapter 2). The focal point is information,
other than the financial statements, that should be conveyed
to investors and other stakeholders to meet their needs (see
Chapter 3).
With investor information needs in mind, the Study Group
assessed what corporate reporting disclosures are relevant
to decision-making. A review of the literature combined
with a survey of current practice helped identify more
than 50 different types of information, each of which was
classified by category — Corporate Overview, Corporate Social
Responsibilities, Review of Operations, Financial Summary and
Analysis, and Supplementary Information.
These five categories provided the foundation for developing
a framework for corporate reporting (see Chapter 4). The
Corporate Overview explains what the organization is all about
(see Chapter 5). Corporate Social Responsibilities explains
how the organization is meeting its social responsibilities
to the public (see Chapter 6). The Review of Operations
discusses what the organization has done and plans to do
(see Chapter 7). The Financial Summary and Analysis depicts
where the organization is now (see Chapter 8). Supplementary
Information relates to other matters of interest to investors
and other stakeholders (see Chapter 9).
Corporate Reporting to Stakeholders
In addition to developing a framework
for corporate reporting, the Study Group
suggests an approach for assessing the
relevance of information to investors and
other stakeholders using four different
classifications — essential, important, desirable
and discretionary. It also suggests that the
various types of information disclosures may
be communicated in different levels of detail — prospectuses, annual reports, annual financial
as a comment, an explanation or an analysis.
Chapter 10 builds on this foundation and
examines ways to enhance corporate
reporting. Chapter 11 looks at the nature
and extent of information to be provided
in summary corporate reporting. Finally,
Chapter 12 investigates corporate reporting
on the Internet.
The research includes a survey of current
disclosure practices in corporate annual
reports (see Appendix A and B) and on
company websites (see Appendix D). It also
reviews narrative reporting requirements in
Canada and internationally (see Appendix E).
Various proposals for new or strengthened
disclosures are made throughout this study
(also see Appendix C). Those proposals need
to be considered in light of the contribution
they can make to the development of a
coherent structure for corporate reporting
while, at the same time, providing relevant
information to meet the perceived needs of
investors and other stakeholders.
While the information analyzed by the
Study Group was considered in the
context of overall corporate reporting, it is
clear that, with stakeholder expectations
of transparency on the rise, corporate
governance disclosure, sustainability
reporting and electronic disclosure merit
further study (see Appendix F).
Chapter 1 / Introduction
ABOUT CORPORATE REPORTING
Corporate reporting has evolved considerably
in direct response to changing public
expectations and social values. It can take
many forms such as a company’s Annual
Information Form, Management’s Discussion
and Analysis (MD&A), Information Circular,
Proxy, interim reports, press releases,
statements, corporate governance reports,
sustainability reports and a variety of
electronic disclosures.
Annual reporting is the traditional norm.1
But, companies, investors and other
stakeholders are now shifting their focus
to the Internet. It is becoming the primary
medium for communicating corporate
financial and business information online. 2
Such reporting may include corporate news,
quarterly earnings releases, annual reports,
audio and/or video conferencing, e-mail
alerts and corporate blogs.3 Today, there is
increasing emphasis on timely and continuous
disclosure.4
In the past, the accounting profession has
concentrated most of its attention on the
annual financial statements. Now, the focus
is shifting to financial and non-financial
information that is not encompassed by the
financial statements, such as MD&A. The
fact that financial statements and related
disclosures are major elements of corporate
reporting highlights differences among various
countries’ accounting and financial reporting
standards. Many countries around the world,
therefore, are promulgating and adopting
the new international financial reporting
standards (IFRS). In fact, Canadian standards
are scheduled to converge with international
standards within the next five years.
Moving financial data across borders requires
respect for host country laws and politics, as
well as participation in the intergovernmental
organizations that regulate international
communications. Several intergovernmental
organizations, including the Organisation for
Economic Cooperation and Development and
the United Nations, have expressed interest in
enhancing corporate information disclosures.
To improve the usefulness of public company
reporting and to keep pace with other leading
jurisdictions, national securities regulators
continue to take steps to expand narrative
disclosures.5 This has meant that corporate
reporting has expanded beyond the confines
of the financial statements to meet investor
information needs.
It is generally acknowledged that financial
statements are an important source of
historical information on which significant
reliance is placed by users. Nonetheless, as
Exhibit 1.1 suggests, many types of useful
information on current events and future
prospects are better provided, or can only
be provided, by means other than financial
statements. It is not surprising, therefore, that
corporate reporting continues to evolve.
Exhibit 1.1
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It is clear that corporate reporting is going
through a period of unprecedented change.
Corporate governance guidelines are more
extensive, socially-responsible investment
indices are more challenging, and reported
earnings are more volatile. In this context,
narrative reporting consistently over time
and across mediums is crucial for providing
insights into a company’s underlying
performance.
For purposes of this Research Study,
“narrative reporting” relates to the critical
contextual and non-financial information that
is reported alongside financial information
so as to provide a broader, more meaningful
understanding of a company’s business,
its market position, strategy, performance,
and future prospects — including quantified
metrics.6
Effective narrative reporting provides a
deeper insight into what really drives value
in the business, and clearly demonstrates
why the chosen strategy is the right
one to take the business forward.7 It will
shift the relationship with investors and
other stakeholders onto an entirely new
footing — one in which the transparency
and credibility of a company’s strategy and
management actions will become a key
competitive differentiator.8 Among other
advantages, this will enable a company to
improve its reputation and market rating,
lower its cost of capital, and attract and retain
the best talent.
CORPORATE REPORTING
CHALLENGES
Information outside the financial statements
has long been regarded as the exclusive
domain of corporate management. For some
years, however, concern has been voiced
over the general quality of such information.
For example, securities commissions have
consistently asked for more discussion and
Corporate Reporting to Stakeholders
analysis of information contained in the
financial statements. And, for years, the
CICA’s Corporate Reporting Awards program
has triggered calls for more and better
disclosure in annual and other corporate
reports.9 In response to these calls, annual
reports continue to grow in size, but far too
many contain incomplete information in terms
of what they should and can convey.
The corporate reporting model has been the
subject of debate for more than a decade.
That debate is accelerating because of
growing resistance to the complexity of
financial reporting, the standard setters’
focus on measurement and the proposed
convergence towards a single set of
International Financial Reporting Standards
(IFRS). Although financial reporting is
evolving, it continues to provide less than the
full range of information needed by many
investors.10
Discussions around the basic conceptual
framework of accounting and reporting
are currently in progress as part of the
convergence process. Unless collaborative
efforts are made to address the overall
framework of information needed for
corporate reporting, new areas of
performance information (for example,
around environmental impacts) are likely to
complicate an already complex picture by
being bolted onto the existing financial model
without due consideration of their strategic
context.11
The current reporting model has been
dominated for decades by financial
information. Even though financial information
is crucial, it provides only one part of the
picture of overall business performance
and has a built-in bias towards recording
the short-term results of companies, giving
too little emphasis to their long-term value
potential. This fact is well understood by both
Chapter 1 / Introduction
preparers and users of financial information,
and most companies and investors now go to
significant lengths to capture and analyze a
broader information set.
The key question is whether preparers
and investors can develop a better
corporate reporting framework that will
improve communications, supplement
and complement the financial reporting
model, and provide a cohesive picture
of performance.12 Without being overly
prescriptive, and allowing for the specific
needs of different industries and companies,
that framework should provide a solid
foundation for disclosing information of value
to investors and other stakeholders. Driven
by a collaborative process of change, it will
help to address the concern that the current
reporting model is becoming irrelevant.
CONCLUSION
The world of corporate reporting is changing
rapidly because the information needs of
users have expanded financial reporting
beyond the financial statements. To deal
with the changes, various parties are calling
for joint efforts to develop a comprehensive
new model for corporate reporting in a
global economy. Accordingly, this Research
Study takes the first step by presenting
a creative and proactive approach to
determining what information disclosures
are relevant to users. The aim is to promote
effective communication by providing helpful
guidance for comprehensive and integrated
corporate reporting.
Notes: 
1. For a historical comparative review of the annual
report information content in 1902 vis-à-vis 1974,
refer to “Annual Reports in the United States:
A Historical Perspective” by A. Schiff in the
Autumn 1978 issue of Accounting and Business
Research, pp. 279-282. The author concludes
that, although the 1902 US Steel report was a
“model” for that time, it represents a level of
disclosure that compares very favorably with the
1974 US Steel report, a typical “modern” report.
Such key items as a statement of changes in
financial position, quarterly reports on net
income, and detailed listings of inventories,
plant and equipment, capital expenditures, and
production equipped the analyst with a volume
of very relevant material.
2. As reported at the NIRI e-Learning Forum on
September 26, 2006.
3. Useful insight is provided in Best
Practices for Corporate Blogs (London:
PricewaterhouseCoopers LLP, 2006) (available
at www.globalbestpractices.com).
4. Online Reporting: Practical Proposals for
Reporting Corporate Performance Online was
published in December 2007 by the Report
Leadership Group (www.reportleadership.com). It
notes that “Several factors are coming together
to create a pull for more — and better — online
reporting. Companies and investors both see
websites as an increasingly useful channel for
communicating information. And changing
legislation is creating new opportunities. In
the UK and US, for example, companies can
now use the internet as their default medium
for reporting. US regulations now positively
encourage reporting in formats such as HTML,
which favours interactivity, rather than simply
providing PDFs of the printed report pages.”
5. Canada has no national securities regulator but
a great deal of debate has taken place over the
past year on this issue. For example, refer to
Blueprint For A Canadian Securities Commission
published by the Crawford Panel on A Single
Canadian Securities Regulator, June 7, 2006
(www.crawfordpanel.ca).
6. This definition of “narrative reporting” is adapted
from page 4 of Narrative Reporting: Give yourself
a head start by PricewaterhouseCoopers LLP,
2007 (available at www.corporatereporting.com).
7. The UK Accounting Standards Board (ASB)
has published its first review of narrative
reporting by UK listed companies, with the aim
of keeping the spotlight on narrative reporting
and the importance of encouraging continuing
improvement in this area (see (http://www.frc.
org.uk/asb/press/pub1228.html). The review,
which also draws on work by other bodies in
the field, found that while most companies were
good at describing their strategy and current
performance, they were weaker on providing
forward looking information and identifying their
principal risks and how they are managed. The
purpose of this review is to highlight the strengths
and weaknesses of current narrative reporting,
in the interests of widespread adoption of best
practice. The ASB, as part of its role in promoting
confidence in corporate reporting, will continue
to review progress in the UK and be a leading
contributor to any international developments on
management commentary.
8. For an expanded discussion of the issues, refer
to National Round Table on the Environment
and the Economy, State of the Debate Report,
Capital markets and sustainability: Investing in a
sustainable future (February 2007) (http://www.
nrtee-trnee.ca/eng/publications/capital-markets/
index-capital-markets-eng.htm).
9. Information about the CICA Corporate
Reporting Awards is on the CICA website
(http://www.cica.ca/1/3/1/index1.shtml).
10. As discussed in Corporate reporting — a time for
reflection by PricewaterhouseCoopers LLP, 2007
(available at www.corporatereporting.com).
11. Chapter 11 of this Research Study briefly reviews
the literature on information overload as well as
complexity in standards and regulations.
12. In the United States, the SEC’s “Committee
on Improvements to Financial Reporting” met
for the first time in August 2007. Its overall
objective is to make recommendations on
reducing complexity in financial reporting. The
SEC had joined with the FASB and the PCAOB
in “an all-out War on Complexity in accounting”.
The Committee’s charter identified four areas to
be a focus for attention: the current approach
to standard-setting; the current approach to
regulating compliance; factors that may drive
unnecessary complexity; and lessons that can
be learned from using international standards.
Details are available online (http://www.sec.gov/
about/offices/oca/acifr.shtml).
Corporate Reporting to Stakeholders
 Chapter 2

Objectives of
Corporate Reporting
This chapter looks at the INTRODUCTION
purposes or “objectives” According to a 2005 survey by the Canadian Investor Relations
of corporate reporting. Institute: “The annual report remains a core document for
The primary purpose is Canadian public companies in their communication with
to communicate — in a current and potential investors.” 1 The survey further explains
readily understandable that, “of all the tools used by publicly traded companies to
way — timely, reliable and communicate with their investors, the annual report offers the
relevant information on a most comprehensive picture of where the company has been
company’s past, present and where it is going.” 2
and future activities
to help users make The annual report’s central role in corporate reporting
economic decisions. That has, if anything, been bolstered by the increase in both its
conclusion is based on an purposes and audiences. Purposes and audiences are closely
assessment of management interrelated, with each audience wanting different types of
accountability, factors information in varying levels of detail. When issuing corporate
pertaining to the reports (including annual and interim reports), management
communication of useful faces the difficult task of balancing the information needs
information and uses for of those different audiences. To communicate truly useful
the corporate report. information, management has to strike a balance between the
needs of its different investors as well as the needs of various
non-investor groups.

MANAGEMENT ACCOUNTABILITY
The responsibility of management to stakeholders is
commonly referred to as accountability. Certain management
accountabilities are depicted in Exhibit 2.1. When a company
considers whether it is accountable to a specific group
of users, it must first determine whether that group has
a legitimate claim to the information it wants. It may, for
example, be accountable to some user groups as a result of
either statutory or contractual relationships. When legitimacy
is defined by law, it is enforceable by law and there can be
no doubt about the question of accountability. Examples of
stakeholders whose claims to information are legitimized by
law include shareholders and regulators.

Corporate Reporting to Stakeholders

Exhibit 2.1
MANAGEMENT ACCOUNTABILITIES
Financial statements
Present statements in accordance with
GAAP.
Control structure
Establish and maintain control structures
that will ensure assets are safeguarded
and management policies and procedures
are followed.
Compliance
Ensure compliance with applicable laws,
regulations, policies and procedures.
Economy and efficiency
Use resources and operate in an
economical and efficient manner.
Goal achievement
Attain the specified goals and objectives.
Fraud
Maintain control processes to deter
fraudulent activities.
In many cases, a public company may be
held legally accountable for: the quality of
its product to the consumer; the credibility
of data supplied to regulators, investors
and financial analysts; and compliance with
laws and regulations governing matters
such as pollution, work safety, working
conditions, health standards and product
safety standards. As well, certain user
groups — such as trade creditors, financial
analysts and stockbrokers — can persuade
companies to account to them because they
can enforce their demands for information.
Chapter 2 / Objectives of Corporate Reporting
Exhibit 2.2 illustrates the corporate
reporting responsibilities of four key
groups — management, directors, audit
committees and auditors. Because
corporate operations are the responsibility
of management, management prepares the
financial statements and the other information
in the corporate report. Clearly, therefore,
these types of information are management’s
representations.
The board of directors, appointed by the
shareholders to oversee management,
has overall responsibility for approving all
corporate reports before they are issued to
investors and other stakeholders. The audit
committee, which oversees a company’s
financial operations, meets with management
and auditors and reports regularly to the
board. The auditor’s responsibility is to
form an opinion on whether the financial
statements are presented fairly in accordance
with generally accepted accounting principles
(GAAP) and to ensure that other information
in the corporate report is consistent with the
financial statements. In this way, auditors add
credibility to corporate reporting.
Exhibit 2.2
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COMMUNICATING USEFUL
INFORMATION
Over the years, much time and effort
has been spent on trying to delineate
the qualitative characteristics that
are determinants of information
usefulness. Exhibit 2.3 lists those
characteristics — relevance, reliability,
timeliness, understandability and
comparability — that define and describe the
attributes of information that make it useful.
Exhibit 2.3
QUALITATIVE CHARACTERISTICS
OF USEFUL INFORMATION
• Relevance
• Reliability
• Timeliness
• Understandability
• Comparability
Relevance
Throughout the current literature, the
concept of relevance has emerged as the
primary qualitative characteristic of useful
information. For information to be useful,
it must be relevant for decision making.
Information is relevant when it can influence
the decisions of users by helping them
assess the financial impact of past, present
or future transactions and events. It is also
relevant when it confirms, or corrects,
previous assessments. Information that
helps users to predict future income and
cash flows is also relevant. Accordingly,
relevance is regarded as a necessary, but not
a sufficient, condition for usefulness.
Reliability
A second major qualitative characteristic of
useful information is reliability. Like relevance,
reliability is viewed as a necessary, but not
a sufficient, condition for usefulness. In its
Statement of Financial Accounting Concepts,
the US Financial Accounting Standards Board
(FASB) stated that relevance and reliability
are probably the most fundamental — and the
most general or abstract — of the qualitative
characteristics commonly described,
and most of the qualitative characteristics can
probably be related to one or the other.
For example, timeliness, comparability,
materiality, substance over form and similar
characteristics contribute to the relevance
of information, while objectivity, verifiability,
neutrality, freedom from bias and similar
characteristics contribute to its reliability.
In fact, both relevance and reliability are so
fundamental that at least a minimal level of
each is essential if information is to be useful.
Accordingly, relevance and reliability are the
prime determinants of usefulness.
A recent research paper emphasized that
reliability is an essential characteristic for
accounting information to be useful for
decision making. 3 The goal of the paper is
to promote a better understanding of the
nature of accounting information reliability
by synthesizing archival and experimental
research evidence within a framework for
accounting information usefulness. Greater
understanding of the empirical literature on
accounting information reliability should assist
standard setters and regulators in establishing
financial reporting standards, preparers
and auditors in implementing standards,
and financial statement users in evaluating
accounting information reliability. It should
also assist academics in conducting research
to produce new insights on reliability and in
conveying the important role of reliability to
students.
Timeliness
Timeliness requires that current information be
made available to interested parties because
the usefulness of information for decision-
Corporate Reporting to Stakeholders
making purposes declines as time elapses. For
information to be useful for decision making,
decision makers have to receive it while it is
still relevant; that is, before it loses its capacity
to influence decisions.
In Canada, corporate legislation requires
that annual financial statements be sent to
shareholders after the end of the fiscal year.
Yet, current and prospective shareholders
and creditors need more timely information
to assess a company’s future prospects
and to decide whether to extend credit
or to sell, hold or buy shares. Investment
analysts also need more timely information
for recommending the purchase, sale or
holding of a security. And, to contribute to
the efficiency of capital markets in correctly
pricing securities on a continuous basis,
companies must release reliable information
to investors and their advisers on a timely
basis.
Understandability
For information to be useful, it must be
understandable. In this regard, investors
and other stakeholders are assumed to have
a reasonable understanding of business,
economic activities and accounting, together
with a willingness to study the information
with reasonable diligence, but not necessarily
with the degree of expertise possessed
by a professional financial analyst. But
management, too, must communicate with
shareholders and other users in such a way
that they both read and understand the
messages transmitted. If management fails to
communicate adequately, an individual user
may end up relying totally on professional
advisers, becoming a passive investor or using
other available sources of information for
decision-making purposes.
Training or experience in accounting
is apparently related to the use and
understanding of such reports. In fact, one
Chapter 2 / Objectives of Corporate Reporting
study found that accounting background
experience and/or training may be necessary
before shareholders become thorough
readers of annual reports and similar
published data. It is possible that, if users
lack accounting experience, they may not
want to tackle the complexities of financial
statements. If management wants to
communicate effectively with all users, it may
have to present at least some less complex
data to encourage those with no accounting
background to read financial reports more
thoroughly (further consideration of form and
presentation of information is provided in
Chapter 10 of this Research Study).
A further point of concern is that most
corporate report readers, including those
with an accounting background, do not
seem to have a good grasp of the nature of
financial reporting practices. Consequently, if
management is to communicate successfully
with all users, there would appear to be a
considerable need to first educate them
about the objectives and methods inherent in
financial reporting.
Comparability
Comparability is a characteristic of the
relationship between two pieces of
information. It enables investors and other
stakeholders to identify similarities in,
and differences between, the information
conveyed. Comparability is important when
comparing two different organizations and
when comparing the same organization over
two periods or at two different points in time.
When making economic decisions, users
evaluate a company’s future prospects by
comparing present performance with past
performance, with the performance of others
in the industry and with the economy as a
whole. Information is most useful when it
permits users to make such comparisons.
Materiality
An additional aspect of relevance is the
significance or materiality of information
to decision makers. Users are interested in
information that may affect their decision
making. For example, certain information
may alter the market price of a company’s
securities and, hence, an investor’s investment
or credit decisions. Traditionally, information
is considered to be material if its omission or
misstatement could influence the decision of
a reasonable investor to invest, or continue to
invest, in a company. In this regard, an item
of information, either solely or in aggregate
with other items, crosses a threshold and is
material if it is probable that its omission or
misstatement would influence or change a
resource-allocation decision.
Materiality is an important concept for the
disclosure of information because its meaning
can differ greatly among stakeholders. For
example, a consideration can be material
because a large stakeholder considers a
particular issue to be important. Alternatively,
specific risks associated with governance,
environmental and social issues can be more
material for companies in one industry than
in another.4 It is clear that materiality requires
the exercise of professional judgment in the
particular circumstances. 5
Other Constraints
Cost is a major constraint on the production
of information. CICA Handbook paragraph
1000.16 notes that:
“The benefits expected to arise from providing
information in financial statements should
exceed the cost of doing so. In developing
accounting standards, the Board weighs the
anticipated costs and benefits of its proposals
in general terms to assess whether they are
justified on cost / benefit grounds. The benefits
and costs of applying accounting standards may
differ between entities depending in part on the
nature, number and information needs of the
users of their financial statements. Therefore,
in developing an accounting standard, the
Board considers whether the requirements of
that standard should apply to all entities or
whether different requirements should apply to
different types of entities for which the cost /
benefit trade-off differs significantly. The cost
/ benefit trade-off is also a consideration for
individual entities in the preparation of financial
statements in accordance with applicable
standards, for example, in considering
disclosure of information beyond that required
by the standards. The Board recognizes that the
evaluation of the nature and amount of benefits
and costs is substantially a judgmental process.”
Although this quote relates specifically
to financial statements, the cost/benefit
constraint also applies to the information
contained in a variety of corporate reports.
Communicating useful information can be of
considerable benefit to a reporting company
because that will enhance the likelihood that
investors and other stakeholders will want
to continue investing in, or dealing with, the
organization. It is impractical, and perhaps
impossible, to quantify the value of these
benefits either to the preparers of corporate
reports or to the users. Although some of the
direct costs of preparation and analysis can
be measured, it is not practical to quantify
these costs in total. Nonetheless, it is essential
to assess the benefits and the costs of
producing such information, and to make any
necessary trade-offs. Clearly, the marginal
benefits of making incremental disclosures
should outweigh the marginal costs.
USES FOR CORPORATE REPORTS
As already stated, the annual report offers
the most comprehensive picture of where
the company has been and where it is going.
There is some doubt, however, about the
usefulness of annual reports to shareholders.
Corporate Reporting to Stakeholders
For example, research on the Efficient
Markets Hypothesis (EMH) implies that
annual reports are issued too late to be of
use to shareholders. On the contrary, investor
surveys indicate that shareholders do, in fact,
use annual reports to confirm previously
released information used in their decision
making. Moreover, because the annual
report usually contains the audited financial
statements, it may be the only information
source to be independently verified.
It appears, then, that both current and
prospective investors find annual reports to
be useful, even without the short-term stock
market reaction to their release. Also, annual
reports may be an important input to long-
term investment decision making — specifically,
to confirm information that investors have
previously received and as a convenient
summary to assist risk/return assessments.
Historically, annual reports were the most
accessible and comprehensive source of
confirmatory information about companies.
Times have changed, however, and there are
now a variety of ways to communicate with
investors and other stakeholders (Chapter 12
of this Research Study examines Corporate
Reporting on the Internet.)
The main reason for defining the purpose
of corporate reports is to motivate their
form and content. This objective should be
acceptable to preparers and users. It should
not change radically, even if users or their
needs change. Nevertheless, there is bound
to be some evolution in the nature of society,
general economic and political philosophy and
the general level of education and financial
sophistication of both preparers and users.
Corporate reports can be considered from two
fundamentally different viewpoints — that of
management and that of users. Management
may want to stress certain matters
whereas users may want quite different
Chapter 2 / Objectives of Corporate Reporting
information. The current literature suggests
that management and user needs for, and
access to, information are influenced by their
individual objectives and their particular
relationship with the business involved.
For example, management is committed
to a particular company, usually exclusively
and with a long-term view. Management’s
first and foremost objective is the survival of
the business, in its own right and in its own
name. An investor’s position is significantly
different. Although an investor’s commitment
to a particular company might be exclusive,
usually it is not. Indeed, an investor may be
more committed to another company in direct
competition with the one under consideration.
Investors may not be as concerned about a
particular company’s survival because their
personal wealth may well grow if it is acquired
by another.
Such major differences have a significant
impact on the type of information required
by each group, and the extent of information
that can be made available. To achieve often
different or even conflicting objectives, users
and management need different information
for their decision making. Moreover, different
classes of users do not always share the same
views on risks and uncertainties and may even
have conflicting interests. For example, there
may be conflicts between: (1) the shareholders
and fixed interest investors over the expected
return on investment; (2) employees
concerned with continuity of employment and
remuneration level; and (3) the customers (or
consumers) over the nature and the quality of
the products and services offered.
In summary, although they were originally
conceived as a timely and thorough
presentation of financial results to
shareholders, corporate reports today serve
a substantially broader range of purposes.
From management’s perspective, they are
intended to provide information for informed
investment decisions, to report on financial
position, operating results and cash flows,
to report on management’s stewardship
and to maintain public relations (see Exhibit
2.4). From an investor/creditor perspective,
however, they are used to assess risk and
return, serve as a general reference, provide
background information for meetings with
management, verify information from other
sources and make performance forecasts
(see Exhibit 2.5).
Exhibit 2.4
USES FOR CORPORATE REPORTS
Management Perspective
• Provide information for making an informed
investment decision.
• Report on financial position, operating
results and cash flows.
• Report on management’s stewardship.
• Maintain public relations.
• Meet legal and regulatory requirements.
• Provide information for an informed
shareholder voting decision.
• Promote a higher price/earnings ratio.
Exhibit 2.5
USES FOR CORPORATE REPORTS
Investor/Creditor Perspective
• Assess risk and return.
• Provide general reference.
• Provide information for meetings with
management.
• Verify information from other sources.
• Make performance forecasts.
• Reach current/potential customers.
• Analyze and track industry sector.
• Make presentations to management.
It is generally acknowledged that the
underlying reason for publishing corporate
reports is to satisfy the perceived
information needs of external users.
Nevertheless, one of management’s most
difficult problems when issuing such reports
is that of balancing the information needs
of the different audiences. A balance must
be struck between the needs of various
investor groups and also between the
needs of investors and other stakeholders.
A further complicating factor (as shown in
Exhibits 2.4 and 2.5) is that management’s
objectives may not always be aligned with
the information needs of the external users
management is accountable to.
The interests of certain user groups in
management’s financial reports and their
entitlement to receive these reports is, in
fact, protected by legislation and other legal
instruments. There are, however, many other
user groups who also have a legitimate
interest in knowing about the activities of
reporting entities. Chapter 3 explores the
nature and identity of these stakeholders,
along with their information needs.
PURPOSE OF CORPORATE
REPORTS
Corporate reports are communications
documents shaped by management, taking
into consideration legal requirements and
generally accepted accounting principles for
financial reporting. Exhibit 2.6 depicts the
corporate reporting environment and the
key, interrelated factors having an impact on
the content of corporate reports — financial
reporting standards, legal requirements,
current practices and the overriding objective
of satisfying users’ information needs.
The CICA Handbook states that financial
reporting is essentially a company’s process
of communicating information to interested
parties. The financial statements should
Corporate Reporting to Stakeholders
contain any information required for fair
presentation of financial position, results of
operations or changes in financial position,
including notes to the statements and
supporting schedules to which the financial
statements are cross-referenced. The financial
statements are, however, only one part of the
process of financial reporting that includes
information in annual reports outside the
financial statements and in prospectuses and
funding proposals.
Exhibit 2.6
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The CICA Handbook clearly states that
the purpose of financial reporting is to
communicate information that is useful to
investors, members, contributors, creditors
and other users in making their resource
allocation decisions and/or assessing
management stewardship. Resource
allocation decisions involve the use of
financial statements and other information
for predicting a company’s ability to earn
income and generate cash flows in the
future to meet its obligations and generate
Chapter 2 / Objectives of Corporate Reporting
a return on investment. The harder it is for
users to correlate company information with
the company’s ability to earn income and
generate cash flows, the more uncertainty
and the higher the risk of loss.
Financial reporting and financial statements
essentially have the same objectives.
Although financial statements are better for
providing some useful information, other
information — particularly about a company’s
present activities and future prospects — can
only be provided by financial reporting
outside the financial statements. It is
reasonable, therefore, to expect the objectives
of corporate reports to be consistent with,
and comparable to, the objectives of financial
statements.
The primary objective of any corporate
report, as stated in Exhibit 2.7, is to
communicate timely, reliable and relevant
information about an organization. That
information — covering the organization’s
past, present and future activities — must be
readily understandable because it will be
used for making economic decisions. The
goal is to satisfy the perceived information
needs of external users of such reports and,
at the same time, to reflect the messages
that management needs to convey, taking
into consideration existing standards for
financial reporting and pertinent legal
requirements.
Exhibit 2.7
PRIMARY OBJECTIVE
OF CORPORATE REPORTING
To communicate in a readily understandable
way timely, reliable and relevant information
on the past, present and future activities
of a company as a basis for making
economic decisions.
Relevant, readily understandable information
on a company’s operating, investing and
financing activities is needed by diverse user
groups who rely on that information but have
limited authority, ability or resources to obtain
it. Such information is needed for:
• assessing management stewardship and
performance;
• predicting, comparing, and evaluating
potential cash flows;
• making comparisons with past
performance, with other entities, with the
industry and with the economy as a whole.
It is essential to give useful information to
all potential users in a form and time frame
relevant to their various needs. Users of
corporate reports need information about
a company’s past to assess management’s
stewardship and performance, as well as
future prospects. Although investment and
credit decisions reflect user expectations
about future performance, those expectations
are commonly based on evaluations of past
performance and the relative performance relevant information on a company’s past,
of other companies in their industry.
Relevant information is also needed for
predicting, comparing and evaluating the
amount, timing and related uncertainty of
potential cash flows. Investors and other users
need an accounting not only of management’s
stewardship, but also of its success in
achieving satisfactory economic performance
and maintaining a strong and healthy financial
condition. Such information facilitates
comparisons with past performance, with
other organizations, with the industry and
with the economy as a whole.
Additional objectives of corporate reporting
might also include:
• attracting financing sources or facilitating
investment decisions through assessment
of such matters as risk and uncertainty,
return on investment, financial stability,
solvency and liquidity;
• showcasing company products and
services, including research and
development;
• responding to the public’s expectations
by reporting on activities affecting society
that can be determined and described
or measured and that are important to
the role of the enterprise in its social and
economic environment;
• meeting statutory and regulatory
reporting requirements.
CONCLUSION
In this chapter, the Study Group examined
the purposes or objectives of corporate
reporting. Based on an assessment of
management accountability, factors affecting
the communication of useful information
and the variety of uses for corporate
reports, it concluded that the underlying
objective is to communicate — in a readily
understandable way — timely, reliable and
present and future activities as a basis for
making economic decisions.
In other words, the goal is to satisfy the
information needs of investors and other
stakeholders and, at the same time, to
reflect the messages that management
needs to convey, taking into consideration
existing standards for financial reporting
and pertinent legal requirements. One of the
most difficult problems management faces,
however, is balancing the information needs
of the different stakeholders. The Study
Group explores those information needs in
Chapter 3.
Corporate Reporting to Stakeholders
Notes:
1. Entitled 2005 Annual Report Survey: A study of
trends and practices in the annual report process,
the report was made possible by the support
of the Canadian Investor Relations Institute
(CIRI) and the sponsorship of CCN Matthews.
Developed with the assistance of Ottawa-based
Genesis Research, the study comprised 37
questions that explored five areas involved in
publishing annual reports – cost, development,
design, production and distribution. Digital
copies of the report are available online (http://
www.genoa.ca/annualreportsurvey).
2. In a 2006 annual report survey conducted by
WthumSmith+Brown (WS+B), a regional New
Jersey CPA firm, three out of four participants
agreed that the annual report is the single
most important publication a public company
produces. The study included more than 100
individual investors, portfolio managers and
securities analysts. Nearly 79% of all survey
participants agreed that annual reports are an
important tool in making investment decisions
about companies. And 90% of all participants
agreed that annual reports should contain
additional information about a company
and its industry, such as sustainability of the
environment or corporate governance, not
just the company’s financial and shareholder
information. In addition, 81% of all participants
preferred a printed annual report to one in an
electronic format. Respondents said that printed
annual reports are easier to read, easier to file
for future reference and easier to highlight, mark
up and take notes on, in addition to being more
mobile than an electronic version. The survey
results are available online (http://www.withum.
com/pressReleaseFiles/Annual%20Report%20
Survey%20Results.pdf).
Chapter 2 / Objectives of Corporate Reporting
3. Laureen A. Maines and James M. Wahlen, “The
Nature of Accounting Information Reliability:
Inferences from Archival and Experimental
Research,” Accounting Horizons (December
2006), pp. 399-425.
4. The Ontario Securities Commission defines
materiality, for purposes of Management’s
Discussion and Analysis (MD&A), as follows:
“Would a reasonable investor’s decisions
whether or not to buy, sell or hold securities in
your company likely be influenced or changed
if the information in question was omitted
or misstated? If so, the information is likely
material.”
5. In Canada, the securities industry is regulated at
the provincial level and the criterion for reporting
is “financial materiality.” Disclosures are required
in MD&A and/or the Annual Information Form if
a matter is financially material. For example, the
Securities Act (Ontario) requires the disclosure
of any “material change” (see Securities Act,
Part XVIII, Continuous Disclosure, Section 75,
“Publication of Material Change” (http://www.
osc.gov.on.ca/Regulation/ActRegulation/ar_
index.jsp). As well, the Toronto Stock Exchange
(TSX) has established disclosure guidelines in
line with the Securities Act (Ontario). The TSX
definition of “material information” is broader
than “material change” because it includes
information concerning rumours and speculation
that may also have a financial impact on a
company (Toronto: Toronto Stock Exchange,
Company Manual, Section 407, http://tsx.
complinet.com/en/tsx_manual.html).
 Chapter 3
Stakeholders
and Their
Information Needs
As there are many diverse
users of corporate reports,
meeting the needs of all of
them would be impossible.
Even trying to balance their
needs would result in long
and laborious reports.
In the Study Group’s view,
if corporate reports are
to be manageable and
practical, it is important
to maintain a focus
on the key stakeholders.
INTRODUCTION
In Chapter 2, the Study Group noted that many stakeholders
have a legitimate interest in the operating, investing and
financing activities of public companies. The nature and
identity of these stakeholders and their information needs
are explored in more detail in this chapter, which also offers a
profile of Canadian shareowners and their attitudes.
OVERVIEW OF STAKEHOLDER CATEGORIES
Investors (current and potential shareholders) are the key
stakeholders. Their entitlement to receive financial reports
is protected by legislation and other legal instruments.
Creditors are a close second. As a minimum, corporate
reports must address the information needs of three primary
groups — investors, creditors and the analysts/advisers who
act on their behalf. Government departments and regulatory
agencies are not considered primary users because they can
readily impose their information requirements.
In recent years, standard-setting bodies in Canada, the
United States and internationally have identified various
corporate reporting user groups and their information needs.
The International Accounting Standards Board (IASB) and
the US Financial Accounting Standards Board (FASB) are
developing a complete and internally consistent common
conceptual framework that improves the existing frameworks
of both boards. That framework is essential for fulfilling the
boards’ goal of developing standards that are principles-
based, internally consistent, internationally converged and
leading to financial reporting that provides the information
needed for investment, credit and similar decisions.1
Primary Users
Exhibit 3.1 sets out the three primary groups of
users — shareholders (investors), creditors and analysts/
Corporate Reporting to Stakeholders
advisers. A brief description of the interests of
each group follows (their information needs
are addressed later in this chapter).
Exhibit 3.1
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1. Shareholders
Because shareholders provide risk capital,
it is essential to nurture their trust.
Individual and institutional investors are
concerned with the risk inherent in, and
return provided by, their investments. They
need information for assessing a company’s
ability to pay dividends, for example.
Current shareholders are, therefore, legally
entitled to receive periodic financial
reports. Potential shareholders are equally
interested in such information, although,
in the future, they may well appear on
the opposite side of a purchase/sale
transaction.
2. Creditors
The financial stability of a company is
important to its debt-holders. They are
interested in information that permits
them to determine whether their loans,
and any accrued interest, will be repaid
when due. The law also establishes the
rights of long-term creditors to receive
financial reports, as do their contractual
agreements with the organization.
Chapter 3 / Stakeholders and Their Information Needs
Trade creditors are more likely to be
interested in a company’s viability over a
shorter period of time, unless they depend
on its continuation as a major customer.
Although bankers will generally demand
regular financial reports, short-term
creditors, such as trade suppliers, may
rely on published financial information
prepared for shareholders.
3. Analysts and Advisers
This group includes financial analysts,
financial journalists, stockbrokers and
bond-raters. They often directly serve
/\OZgaba the needs of shareholders and creditors
O\R/RdWa]`a
by providing skilled analyses and
interpretation of financial reports. Financial
analysts will often ask management for
information when they investigate an
enterprise or an industry (for example, on
behalf of a firm of stockbrokers). When
giving this information, companies need
to take care not to disclose previously
undisclosed material information in
contravention of insider trading laws.
When a company compiles a report for
shareholders, it is also preparing a report
for financial analysts. Give them enough
material to build a solid investment
profile and they will have what they
need to induce new investors, especially
institutional investors, to participate in the
company’s growth.
Secondary Users
As well as the three primary user groups,
many other audiences merit consideration
when annual reports are being prepared.
Exhibit 3.2 lists 11 categories of secondary
users who have an interest in receiving such
reports. Brief comments on the interests of
each of these user groups follow.
Exhibit 3.2
and safety, law enforcement, highways,
A31=<2/@GCA3@A airports and harbours. Public companies
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each other.
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2. Standard Setters
BVS>cPZWQ Standard setters have a broad interest
in the reporting practices of both profit-
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oriented and non-profit organizations.
Corporate reports serve as a basis for
developing, amending or augmenting
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3. Government
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municipal — are interested in the allocation
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of the companies operating under their
Ac^^ZWS`a purview. They require information to
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their jurisdictions.

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1. The Public
Political parties, public affairs groups,
consumer and environmental protection
groups and others all take a great
deal of interest in the affairs of public
companies. The nature and the extent of
their interest will, however, vary widely
over periods of time.
How effectively public companies operate
is largely determined by the facilities that
society makes available — for example,
systems of education, public health
4. Regulatory Agencies
A number of regulatory agencies
(government or quasi-government bodies,
such as the securities commissions and
stock exchanges) also have a legitimate
interest in financial reports of listed
companies.
5. Employees
Employees are interested in information
about their company per se, its general
operations, stability and profitability.
Current employees clearly have an
interest in the financial affairs of their
employer since it is the source of their
income. Potential employees may also be
interested in learning about a company’s
financial affairs, and past employees may
have a legitimate interest in information if

Corporate Reporting to Stakeholders

 their pensions depend on the company’s
future prospects.
To find out why companies report to their
employees, one research study compared
the perceptions of accounting executives
and employees on this practice. The results
showed a considerable consensus on three
reasons: to improve employee/employer
relationships (87% of executives and 91%
of employees); to demonstrate an open
approach to management (84% and 82%
respectively); and to increase employee
understanding of the company’s operations
and activities (85% and 95%).
6. Customers
A company’s present, potential and
past customers will be interested in its
financial affairs when deciding how much
business to do with it and assessing
its likely ability to service a product or
to honour warranty agreements. Major
customers will be concerned about
whether they can rely on it as a continual
source of supply.
7. Suppliers
Current and potential suppliers will be
interested in whether a company might
serve as an outlet for their products or
services and, if it is a major customer,
whether that situation will continue.
8. Industry Groups
These groups will be interested in financial
reports from companies within their
industry sector or related groups.
9. Labour Unions
Unions will be interested in the financial
reports of employers, especially if there
are ongoing wage negotiations. They will
also be interested in the financial reports
of others in the same industry and of
corporations in general. Because of the
Chapter 3 / Stakeholders and Their Information Needs
strength of their bargaining position,
labour unions are often able to obtain
special-purpose financial information
during wage bargaining even though
they are not legally entitled to it.
10. Other Companies
Other companies, both domestic and
foreign, may be interested in doing
business with a reporting company. They
may be potential or current members of
user classes already mentioned above.
Alternatively, their interest may be
competitive. If that is the case, a company
will resist revealing confidential information
that could jeopardize its interests.
11. Academic Researchers
As with the standard-setting bodies,
researchers have a general interest in
studying the form, content and quality
of corporate reports and will generally
survey the practices of a wide variety of
organizations.
It is clear that the interests of the broad
stakeholder groups identified above ought
to be considered when determining the
nature and extent of information to be
included in corporate reports. For purposes
of this Research Study, however, the three
primary groups of users are considered to be
the shareholders (investors), creditors and
analysts/advisers who act on their behalf.
Disclosing information to satisfy their needs
should, at the same time, help meet the
information needs of other user groups.
CANADIAN SHAREHOLDER
PROFILE AND ATTITUDES
As a basis for identifying and addressing
the kinds of information that various
groups of users want or are likely to want,
it is important to consider their information
sources and their objectives. In this regard,
the 2004 survey on Canadian Shareowners
(undertaken periodically by the TSX Group)
provides some insight. 2 The survey found that
49% of adult Canadians are shareholders,
either as individuals or participants in mutual
funds. Several other shareowner surveys
are available on the World Federation of
Exchanges website. 3
Sources of Information
and Investment Advice
As Exhibit 3.3 shows, there is a generalized
perception that investors consult many
sources when seeking investment
information. Those sources include
newspaper business pages (mentioned by
57% of those surveyed), corporate annual
reports (47%), Internet websites (43%),
mutual fund prospectus (40%), investment
magazines and newsletters (38%), financial
programs on television (32%) and research
reports (31%). They also include books (25%),
seminars (14%) and courses (9%). Preparers
of corporate reports must be aware of
these various information sources if they are
to adequately integrate and interpret the
information they contain.
Exhibit 3.3
SOURCES OF INVESTMENT INFORMATION
Source of information % of
shareowners
1. Newspaper business pages 57%
2. Corporate annual reports 47%
3. Internet websites 43%
4. Mutual fund prospectus 40%
5. Investment magazines/
newsletters 38%
6. Television programs 32%
7. Research reports 31%
8. Books 25%
9. Seminars 14%
10. Courses 9%
Source: Adapted from Canadian Shareowners safety and stability of investment; because
(Toronto: TSX Group, 2004), p. 59.
Investors also rely on various sources of
investment advice. As Exhibit 3.4 shows,
investors turn to banks and trust companies,
family and friends, financial advisors,
mutual funds, stockbrokers, accountants
and insurance companies. To understand
the motivations of shareowners, the survey
probed their reasons for investing. It found
the most common objectives were growth,
preservation of capital and income.
Exhibit 3.4
INFORMATION ADVISORY SOURCES
Source of advice used % of
shareowners
1. Bank/trust company 51%
2. Family/friends 39%
3. Financial advisor 37%
4. Mutual fund company 34%
5. Stock broker 26%
6. Accountant 22%
7. Insurance company 15%
Source: Adapted from Canadian Shareowners,
op.cit., p. 56.
It is evident that there are other ways
to make information publicly available.
Alternatives could include, for example,
filings with securities commissions, analysts’
reports, the financial press, business and
trade publications, database submissions
and the Internet. Chapters 11 and 12 consider
alternative communication vehicles when
addressing the problem of information
overload.
Users’ Objectives
To understand the motivations of
shareowners, the TSX survey probed their
reasons for investing in stocks and mutual
funds. It found the most common reasons for
investing in stocks were: to make money; for
you can withdraw funds on short notice;
Corporate Reporting to Stakeholders
because of an interest in certain companies,
industries or sector of the economy; and
for tax advantages. Generally speaking,
shareowners place more importance on
capital appreciation than on dividend yield
(83% compared with 73%); more than half
emphasized short-term profit opportunities;
and more than three-quarters of stock mutual
fund owners were looking for regular income.
Investors ranked safety and stability of
investment and the ability to withdraw funds
on short notice very highly (78% and 69%
respectively). Tax advantages were also noted
as important to the majority of investors (63%
of common/preferred shareowners and 86%
of stock mutual fund owners). As well, about
60% of all shareowners expressed an interest
in certain companies, industries or sectors of
the economy.
INFORMATION NEEDS
OF STAKEHOLDERS
Information in corporate reports may be
used for a variety of purposes. In broad
terms, however, corporate reports — including
financial statements and other supplementary
information — should reflect a company’s past,
present and future activities to give users a
good basis for making economic decisions.
The question of whether users have similar
information needs lies at the heart of general-
purpose external financial reporting and has
important policy implications. Specifically,
if the information needs of the various
stakeholder groups are similar, the concept of
general-purpose external reporting is feasible.
On the other hand, if their information needs
are materially different, it may be time to
Chapter 3 / Stakeholders and Their Information Needs
abandon the concept of general-purpose
reporting and, instead, prepare a variety
of single-purpose corporate reports, each
tailored to satisfy the needs of a particular
user group.
The research literature suggests that
the major types of users have similar
measurement needs but varying disclosure
needs. If this interpretation is correct, the
implications for accounting policy makers
are encouraging, for two reasons. First, the
findings tend to support the feasibility of
general-purpose external financial reporting,
at least from the standpoint that users
appear to need common measurements.
Second, if accountants want to develop
different information sets for each
important user group, preparing tailor-made
financial reports that differ only in terms
of disclosures would be less costly than
tailor-made reports that also differ in the
underlying basis of accounting measurement.
Research has also shown that, when making
their decisions, investors look to corporate
reports to provide information that will
help them assess performance; evaluate
management quality; estimate future
prospects; assess financial strength, stability,
adaptability, solvency, liquidity, risk and
uncertainty; decide on resource allocation;
make comparisons; make valuation decisions;
determine compliance with the law or
regulations; and assess contribution to society.
Exhibit 3.5 gives an overview of the
information needs that corporate reports
should help satisfy.
Exhibit 3.5
PERCEIVED INFORMATION NEEDS
1. Assess overall performance.
2. Assess management quality and
stewardship.
3. Estimate future prospects.
4. Assess financial strength and stability.
5. Assess solvency.
6. Assess liquidity.
7. Assess risk and uncertainty.
8. Aid in resource allocation.
9. Make comparisons.
10. Value debt and equity holdings.
11. Assess adaptive ability.
12. Determine legal compliance.
13. Assess contribution to society, national
goals, etc.
1. Assess Performance
Users are interested in assessing corporate
performance not only in absolute
numerical terms, but also by comparison
with their own expectations formulated
in the past, by comparison with past
expectations expressed by management
and by comparison with the performance
of other companies in the same or other
industries.
2. Assess Management Quality
The quality of management cannot be
measured merely in financial terms, but
annual reports will nevertheless be helpful
in providing indicators of management’s
ability to maintain and improve profits,
operate the company efficiently and
discharge its stewardship function
effectively.
3. Estimate Future Prospects
Different users will be interested in
estimating different aspects of a
company’s future prospects such as:
• the trend of profits, dividends and
interest payments;
• requirements for further capital;
• trends in future capital investment;
• prospects for employment in the future;
• the likelihood that the company will
continue to be a good customer or
source of supply;
• the likelihood that it will be able to
continue to support pension payments
to past employees and fund those of
current employees.
4. Assess Financial Strength and Stability
Many users will be interested in judging
a company’s stability and its potential
vulnerability to various changes in the
economic climate.
5. Assess Solvency
A number of users will be interested
in a company’s ability to pay debts as
they become due. When making future
decisions about investments, purchases,
supplies and extensions of credit, users
will assess whether a company can repay
current obligations and also service long-
term debt (meeting debt covenants is
often a primary concern of creditors).
6. Assess Liquidity
Many users will be interested in assessing
liquidity, for example, when deciding
whether and on what terms to extend
credit or in evaluating the likelihood of
changes in dividend or interest payments.
7. Assess Risk and Uncertainty
Information in annual reports can facilitate
assessment of risk and uncertainty by
indicating how a company succeeded in
the past and by providing guidance for
estimating what may happen in the future.
8. Aid in Resource Allocation
Various groups of users are concerned
in allocating resources to companies,
Corporate Reporting to Stakeholders
 either by primary investment or through
grants or other payments. Similarly,
investors operating in the secondary
financial markets make resource allocation
decisions, based at least in part on reading
published financial reports.
9. Make Comparisons
Many user groups are interested in
comparing various aspects of a company’s
position or performance either with its
own past record (regarding trends) or with
other entities.
10. Make Valuation Decisions
The figures contained in annual reports
may be helpful to debt and equity
investors in assessing the value of their
current or potential holdings in a company.
11. Assess Adaptability
Users may be interested in estimating the
ability of a company to switch its areas
of operations in accordance with possible
changes in economic conditions, and
annual reports may be able to help them
make such assessments.
12. Determine Compliance with the Law or
Regulations
Although some government departments,
such as the Canada Revenue Agency, may
demand specific information, others may
find annual reports useful in assessing
compliance with the law or regulations.
Similarly, users may seek assurance
regarding compliance; reading annual
reports may help in doing so.
Chapter 3 / Stakeholders and Their Information Needs
13. Assess Contribution to Society
Users may wish to know about a
company’s contribution to education,
health, sports, job creation, exports,
national income, development of national
resources, or about its efforts to eliminate
pollution or improve the environment, all
of which they can discover by reading
published annual reports.
The preceding analysis shows that nearly
all users are making economic decisions.
Therefore, corporate reports can help meet
the common information needs of most
stakeholders, for example:
• to decide when to buy, hold or sell an
equity investment;
• to determine distributable profits and
dividends;
• to assess the stewardship or accountability
of management;
• to assess the risk associated with
extending credit;
• to assess the ability to provide
remuneration and other benefits to
employees;
• to regulate the activities of enterprises;
• to determine taxation policies; and
• to prepare and use national income
statistics.
CONCLUSION
This chapter explored the perceived
information needs of stakeholders in light of
the communication objectives established
in Chapter 2. It concluded that corporate
reports should address the information needs
of three primary groups of users — investors
(shareholders), creditors and analysts/advisers
who act on their behalf. Because nearly all
users make economic decisions, corporate
reports inter alia can help meet the common
information needs of most stakeholders.
Notes:
1. Information on the current status of the
Conceptual Framework joint project by the
International Accounting Standards Board
and the US Financial Accounting Standards
Board is available on the Internet (http://www.
iasb.org/Current+Projects/IASB+Projects/
Conceptual+Framework/Conceptual+Framework.
htm).
2. The July 2002 Canadian Shareowners survey
is available on the Internet (http://www.world-
exchanges.org/publications/TSX%20Group%20
2002.pdf).

3. A number of share ownership surveys are

When making decisions, users look to available on the World Federation of Exchanges
website (http://www.world-exchanges.org/WFE/
corporate reports and other sources, such
home.asp?menu=266&nav=ie).
as the financial press, to provide information
that will help them assess performance,
evaluate management quality, estimate future
prospects, assess financial strength, stability,
adaptability, solvency, liquidity, risk and
uncertainty, decide on resource allocation,
make comparisons, make valuation decisions,
determine compliance with the law or
regulations, and assess contribution
to society.

In Chapter 4, the Study Group reviews the

literature, reports on the survey of current
practice and proposes a framework for
corporate reporting. It also suggests an
approach for assessing the relevance of
information disclosures to investors and other
stakeholders for decision making.

Corporate Reporting to Stakeholders

 Chapter 4
Framework for
Corporate Reporting
This chapter reviews
the current literature
on corporate reporting,
presents the results of a
survey of current practice
and proposes a framework
for the overall process. In
addition, it suggests an
approach for assessing the
relevance of information
disclosures to investors
and other stakeholders for
decision making.
INTRODUCTION
In Chapter 2, the Study Group concluded that the objective
of corporate reporting is to satisfy the information needs of
external users. When issuing corporate reports, one of the
most difficult problems management faces is balancing the
needs of the different stakeholders. The Study Group explored
those needs and concluded, in Chapter 3, that management
should respond to the perceived information needs of three
primary groups — investors, creditors and the analysts/advisers
who act on their behalf.
To identify what kind of information is relevant, the Study
Group drew on its own practical experience, supported by a
review of corporate legislation and regulatory requirements,
as well as authoritative pronouncements. It also surveyed the
information content of a sample of 2004 and 2005 annual
reports of Canadian companies.1 Overall, the Study Group
identified more than 50 different types of information.
The Study Group chose several criteria for deciding whether
corporate reports should contain certain types of information.
The most important were relevance in meeting the primary
objective of corporate reporting and relevance in meeting
the perceived information needs of the primary stakeholders.
That is, will the disclosure of particular types of information
clearly help investors and other stakeholders gain a better
understanding of the affairs of a company as a whole or a
significant part of it?
LITERATURE REVIEW
During the last two decades, many surveys have been carried
out in Canada, Australia, New Zealand, the United Kingdom
and elsewhere. 2 Some, especially those done for corporate
reporting awards, focused on the nature, type and extent of
information included in annual reports. Others attempted to
determine what users wanted to see in corporate reports.
Corporate Reporting to Stakeholders
Canada3 and many other countries,
including Australia,4 New Zealand, 5 the
United Kingdom,6 the United States7 and
India, to name but a few, currently have
corporate reporting award programs.
These competitions have evolved to keep
pace with the capital markets and the ever
increasing expectations of investors and
other stakeholders for greater transparency
and better information for investment
decision making. By laying down norms for
acceptably informative reporting, they have
prodded many organizations away from their
terse and often inadequate reporting style.
More and more reports now cover subjects
previously neglected, such as environmental
issues, labour relations and predictions about
performance. The fact remains, however, that
far too many corporate reports simply don’t
do a proper job in terms of what they should
and can convey.
Current literature shows that questionnaires
are frequently used to collect evidence
about the usefulness of various information
disclosures. Respondents are asked to
evaluate the relative importance of each
information item in the questionnaire
according to how useful they find it in, say,
making an equity investment or bank loan
decision.
It is important to note that the nature and
extent of specific information items covered
by the surveys reviewed varied considerably.
For example, some of those surveys may
well break down one type of information
defined by the Study Group into a number
of individual information items. Furthermore,
the relative importance of a certain type of
information may vary from one stakeholder
group to another.
As a general conclusion, however, all
stakeholders find at least some utility in most
of the information presented in corporate
Chapter 4 / Framework for Corporate Reporting
reports. 8 Later in this chapter, the Study
Group evaluates the relevance of each type
of information for meeting the perceived
information needs of investors and other
stakeholders. A detailed analysis follows in
Chapters 5 to 9.
SURVEYING CURRENT PRACTICE
The background research for this Study
included surveys of current reporting
practices in annual reports and on company
websites (refer to Chapter 12 and Appendix
D). The main objective was to identify the
frequency of disclosure of various types of
information that are not part of the audited
financial statements. In most cases, this called
for a subjective assessment of the information
because companies seldom reported the
information precisely as defined by the
Study Group. When interpreting the results,
it is important to remember that no formal
attempt was made to judge the quality of
information disclosures.
The survey of annual reports covered 125
Canadian companies in 12 industry sectors
for the fiscal years 2004 and 2005. All of the
survey companies participated in the 2005
and/or the 2006 CICA Corporate Reporting
Awards program. Appendix A lists the survey
companies by industry sector, along with the
company website URL.
For each company, more than 50 different
types of information were identified. Each
type of information was classified under
one of five broad categories — corporate
overview, corporate social responsibilities,
review of operations, financial summary and
analysis and supplementary information
(the categories were based on those used
for the 1991 Research Study). Appendix B
presents the results of the survey of current
practice — by category of information and by
industry classification. The survey findings
suggest a profile of a typical annual report
as set out in Exhibit 4.1. To facilitate a proper understanding of those findings, additional
explanations and interpretations are provided in the evaluations in Chapters 5 to 9.

Exhibit 4.1
PROFILE OF A TYPICAL 2004/2005 ANNUAL REPORT

Survey % of
Companies 125
A CORPORATE OVERVIEW 
1 Corporate profile 125 100%
2 Corporate mission 115 92%
3 Products/services/markets 110 88%
4 Company ownership and control 28 22%
5 Organizational structure 110 88%
6 Management team 120 96%
7 Management committees 40 32%
8 Comparative financial highlights 121 97%
9 President/CEO letter 125 100%
10 Commentary on industry and economy 98 78%
11 Outlook 125 100%
B CORPORATE SOCIAL RESPONSIBILITIES 
1 Human resources 111 89%
2 Social responsibilities 89 71%
3 Environmental responsibilities 89 71%
C REVIEW OF OPERATIONS 
1 Overall review and interpretation 122 98%
2 Segment review of operations 118 94%
3 Production information 85 68%
4 Competitive conditions 83 66%
5 Response to change 15 12%
6 Forward-looking information 124 99%
7 Risks and uncertainties 124 99%
8 Financial and operating objectives 91 73%
9 Performance compared to objectives 46 37%
10 Research and development 54 43%
11 Significant agreements and contracts 119 95%
12 Industry specific data 107 86%

Corporate Reporting to Stakeholders

Exhibit 4.1 (continued)
PROFILE OF A TYPICAL 2004/2005 ANNUAL REPORT
Survey % of
Companies 125
D FINANCIAL SUMMARY & ANALYSIS 
1 Analysis of operating results 125 100%
2 Segment analysis 112 90%
3 Analysis of financial position 119 95%
4 Capital investments and expenditures 121 97%
5 Analysis of cash flows 98 78%
6 Liquidity 124 99%
7 Quarterly financial information 124 99%
8 Accounting policy changes not yet implemented 124 99%
9 Statement of management’s responsibility 124 99%
10 Financial statements/auditor’s report 125 100%
11 Historical summary (minimum 5 years) 100 80%
12 Performance measures 123 98%
13 Share data 125 100%
E SUPPLEMENTARY INFORMATION 
1 Table of contents/navigation 122 98%
2 Glossary of terms 58 46%
3 Corporate directory 124 99%
4 Shareholder and investor information 124 99%

PROPOSING A FRAMEWORK do and where it is now.9 Exhibit 4.2 presents

FOR CORPORATE REPORTING
With investors in mind, the Study Group
assessed what corporate reporting disclosures
are relevant to decision making. It undertook
a detailed analysis of more than 50 different
types of information that might be useful and,
therefore, warrant possible inclusion in one or
more corporate reports.
The Study Group assessed whether each type
of information will tell investors and other
stakeholders precisely what they need to
know — what a company is about, its social
responsibilities, what it has done and plans to
the broad categories used in allocating and
evaluating the various types of information:
A. Corporate Overview — explains what the
company is all about and the economic
environment within which it operates.
B. Corporate Social Responsibilities — explains
how the company is meeting its social
responsibilities to the public.
C. Review of Operations — discusses what the
company has done and plans to do and
whether it has the necessary financial and
other resources to achieve its goals.
D. Financial Summary and Analysis — depicts
where the company is now by presenting

Chapter 4 / Framework for Corporate Reporting


the financial statements and the
corresponding analysis of operating
results, financial position and cash flows.
E. Supplementary Information — relates to
other matters of interest to investors and
other stakeholders.
The proposed Framework for Corporate
Reporting addresses the fundamental a]QWOZ`Sa^]\aWPWZWbWSab]bVS^cPZWQ
information needs of investors and other
stakeholders: 10
• to know a company’s corporate
objectives and to be able to evaluate the
performance against those objectives;
• to have adequate information about the
social and economic environment within
which the company has been operating
and will be operating;
• to know management’s financial plan
for the current and future accounting
periods and explanations of the major
assumptions and sensitivities used in
preparing that plan to be able to judge
where the company is going in the future
and whether it has the necessary financial
and operating resources to do so;
• to know what the total wealth of the
company is now, compared with what
it was at the time of the last corporate
report and the reasons for any changes;
• to know the company’s actual
performance for the accounting period
just past, how this compares with its
previously published plan for that period
and management’s explanations of any
significant variances between the two;
• to know the ownership and control of the
company itself and the experience and
background of its directors and officials.
Exhibit 4.2
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b]AbOYSV]ZRS`a
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EVObbVSQ][^O\gWaOZZOP]cb 6]ebVSQ][^O\gWa[SSbW\UWba
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W\dSab]`aO\R]bVS`abOYSV]ZRS`a
ASSESSING THE RELEVANCE
OF INFORMATION
As a basis for assessing the relevance of
information disclosures, the Study Group
defined precisely what each encompassed.
Helpful insight was obtained from reviewing
actual examples drawn from current annual
reports in conjunction with the survey of
current practice.
Having identified the information included
in annual reports, the Study Group then
deliberated whether that information should
be disclosed. Each type of information
identified in the Study was assessed
based on its relevance in meeting the
information needs of investors and other
stakeholders. The relative importance of
each type of information was evaluated
(see Chapters 5 to 9) using four different
classifications — essential, important,
desirable, and discretionary:
• Essential relates to information that should
be disclosed because stakeholders need it
to understand an organization’s activities.
• Important relates to information that
should be disclosed because it helps
Corporate Reporting to Stakeholders
 stakeholders interpret an organization’s
activities and enables them to make
appropriate risk/return trade-offs in their
resource allocation decisions.
• Desirable relates to information that would
normally be disclosed because it facilitates
stakeholders’ assessment and analysis of
past performance and future prospects.
• Discretionary relates to information
whose relevance to stakeholders depends
mainly on the industry or the specific
circumstances of each organization.
In addition, the Study Group deliberated
whether the various types of information
disclosures may be communicated as a
comment, an explanation or an analysis (see
Chapters 5 to 9):
• a comment is a simple description,
perhaps a sentence or two, that may
also include a reference to additional
information sources, such as a company
website;
• an explanation is a concise summary
that may include a narrative and a table,
perhaps a page in length;
• an analysis is a detailed discussion that
may include narrative and performance
measures presented in tables, charts or
graphs.
Other matters were also considered: Can
reliable information be obtained on a
timely basis? Would the cost of collecting
and presenting it be prohibitive? Is there
a danger in revealing information of value
to competitors? Given the current state
of corporate reporting, is the information
available elsewhere (for example, in the
Annual Information Form, Management’s
Discussion and Analysis, Information Circular,
Proxy, interim reports, press releases and
prospectuses)?
Chapter 4 / Framework for Corporate Reporting
CONCLUSION
In this chapter, the Study Group reviewed the
current literature, presented the results of a
survey of current practice and developed a
framework for corporate reporting comprising
five broad categories — Corporate Overview,
Corporate Social Responsibilities, Review
of Operations, Financial Summary and
Analysis and Supplementary Information.
It suggested an approach for assessing
the relevance of information to investors
and other stakeholders using four different
classifications — essential, important, desirable
and discretionary. It also suggested that
the various types of information disclosures
may be communicated in different levels of
detail — as a comment, an explanation or an
analysis.
Building on this foundation, the Study Group
assesses the relative importance of each type
of information in Chapters 5 to 9. Chapter
10 examines ways to enhance corporate
reporting. Chapter 11 looks at the nature
and extent of information to be provided
in summary corporate reporting. Finally,
Chapter 12 investigates corporate reporting
on the Internet. The Research Study’s
various proposals for new or strengthened
disclosures need to be considered in light
of the contribution they can make to the
development of a coherent structure for
corporate reporting while, at the same time,
providing relevant information to meet the
perceived needs of investors and other
stakeholders.
Notes:
1. A sample of 12 annual reports of Canadian
companies were used for the preliminary survey.
As all were winners in the 2005 CICA Corporate
Reporting Awards program, their information
disclosures were considered by the Study Group
to be among the best.
2. For example, the World Federation of
Exchanges posts on its website share
ownership surveys undertaken by member
exchanges, including Canada’s TSX Group
(http://www.world-exchanges.org/WFE/home.
asp?menu=266&nav=ie).
3. In Canada, the CICA has sponsored the
Corporate Reporting Awards program since 1951
(see http://www.cica.ca/1/3/1/index1.shtml).
An independent panel of judges is selected
from the CICA, the Toronto CFA Society, the
Canadian Investor Relations Institute (CIRI)
and the International Institute for Sustainable
Development (IISD). Awards are presented in
four judging categories: financial reporting,
corporate governance disclosure, electronic
disclosure and sustainable development
reporting. For 10 years, IR Magazine Canada
Awards have also been given for excellence in 15
categories, including the best annual report (see
http://www.thecrossbordergroup.com/pages/56/
IR+magazine.stm).
4. The Australian Institute of Management
introduced its annual report awards in 1950.
Annual reports are judged for three main
sectors — competitive business enterprises, public
administration and other government bodies,
and professional and health organizations.
One of the objectives of the program is to
encourage companies to do more than just meet
the minimum statutory and stock exchange
requirements; the awards are looking for
reporting of valid and objective performance
measures and the presentation of adequate
financial and other information in a form that can
be readily understood.
5. Each year, the New Zealand Society of
Accountants gives awards for the best private
sector and public sector financial statements.
6. The first awards, which began more than 30
years ago, were The Accountant/Stock Exchange
awards for the best annual reports from UK
public companies. In the last decade, the
Accountancy Age/Industrial Society simplified
reporting awards were launched.
7. Each year since 1991, three independent entities
(the National Investor Relations Institute, DePaul
University and the American Institute of Graphic
Arts) evaluate the annual reports of more than
700 public companies based on their visual
presentation, the clarity and communicability of
their message and the depth and candor of their
financial reporting. The awards evaluation criteria
are available on the NIRI website (http://www.
niri-chicago.org/?page=awards_triad_criteria).
8. See, for example, Simon S.M. Ho and Kar
Shun Wong, “Investment Analysts’ Usage and
Perceived Usefulness of Corporate Annual
Reports,” Corporate Ownership & Control,
Volume 1, Issue 3 (Spring 2004). This paper
reports on a study of the perceptions and
beliefs of external users (investment analysts)
of corporate annual reports in one of the
major international financial centres — Hong
Kong. It was found that analyst users (1) view
annual reports as having high information value
particularly in terms of relevancy, (2) have a
relatively high usage of annual reports and
read the income statement and balance sheet
most often, (3) consider the most important
voluntary disclosure items to be discussions
of factors affecting future financial results,
future prospects of the company, main product
market share, acquisition and disposal activities,
and China business review, and (4) feel annual
reports are somewhat useful, but the amount of
information disclosed remains inadequate. Only
a small percentage of users felt that the current
disclosure requirements are either effective or
very effective in serving investors’ needs and
that much improvement is still needed. The
implications of these findings for management,
investors, regulatory bodies and researchers are
discussed.
9. This was also the underlying message in the
landmark research report The Future Shape of
Financial Reports (London and Edinburgh: The
Institute of Chartered Accountants in England
and Wales and The Institute of Chartered
Accountants of Scotland, 1991). The report
noted that it is axiomatic that the information
conveyed must be relevant to the target
market at which it is aimed. Since it would be
impracticable to prepare a separate publication
for each of the audiences containing only what
those particular readers wanted or needed
to know, all the relevant information must be
bound into one single document — the annual
report — and presented in passages or pages
easily understood by the target readership.
10. These needs are consistent with those identified
in the landmark Making Corporate Reports
Valuable (Edinburgh: the Institute of Chartered
Accountants of Scotland, 1988), p. 29.
Corporate Reporting to Stakeholders
 Chapter 5

Corporate
Overview — Part A
The first major category INTRODUCTION
of information in the Exhibit 5.1 lists the types of information allocated to this
Framework for Corporate category. It shows that the corporate overview may comprise
Reporting is the Corporate a corporate profile and a corporate mission, along with
Overview. It conveys information on products, services and markets, company
what the company is all ownership and control, organizational structure, management
about and the economic team and management committees. It may also include
environment within which comparative financial highlights, a president/CEO letter,
it operates. commentary on industry and economy and information about
the company’s outlook.

Exhibit 5.1
CORPORATE OVERVIEW INFORMATION

A1 — Corporate Profile
A2 — Corporate Mission
A3 — Products, Services and Markets
A4 — Company Ownership and Control
A5 — Organizational Structure
A6 — Management Team
A7 — Management Committees
A8 — Comparative Financial Highlights
A9 — President/CEO Letter
A10 — Commentary on Industry and Economy
A11 — Outlook

This chapter defines each type of information and surveys

current practice. It also considers other sources of reference,
as well as authoritative pronouncements and regulatory
requirements, if any. The Study Group’s deliberations and
proposals on the relative importance to investors and
other stakeholders follow, along with illustrative examples
of the different levels of disclosure discussed in Chapter
4 — comment, explanation and analysis.

Corporate Reporting to Stakeholders


A1 — CORPORATE PROFILE
Definition
The corporate profile describes:
• the industry or industry segment the
company operates in;
• the company’s business (including joint
ventures); and
• the geographic location of its operations.
Supplementary data may also be provided
on the historical development of the
business and the incorporating statutes and
jurisdictions.
Survey Results
According to the annual report survey results
presented in Chapter 4 and Appendix B, all
of the companies provided corporate profile
information in 2004-2005, usually in the first
few pages of the annual report.
According to the website survey results
presented in Chapter 12 and Appendix D, 76%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The CICA’s Corporate Reporting Awards 2006
(page 39) states that: “This year, financial
reporting judges focused on a number of
features in arriving at their evaluations of each
annual report: Judges looked for corporate
profiles.... Most did a good job.”
AR TRENDS 2005 (page 8) states that a
corporate profile: “…can allow a company to
achieve a number of objectives. First, it can
make it easier for investors to understand
a complex company’s operations and
objectives.”
Chapter 5 / Corporate Overview — Part A
Study Group Deliberations
Information on the nature of a company’s
business, industry and geographic location(s)
is fundamental to the assessment and
interpretation of financial statements. A
corporate profile quickly provides that
information, as well as an immediate context
for reading more of the annual report.
Study Group Proposal
In the Study Group’s view, it is important
that companies provide stakeholders with
a corporate profile identifying the industry
or industry segment, their business and/or
the geographic location of operations.
Illustrative Examples
A1-Transcontinental Inc., 2005 Annual Report
(comment)
A1-Empire Company Limited, 2005 Annual
Report (explanation)
A1-Precision Drilling Corporation, 2005 Annual
Report (analysis)
A2 — CORPORATE MISSION
Definition
A corporate mission statement broadly
describes a company’s purpose and may
also include elements of what it is, what it
is doing, why it is doing it and whether it is
sustainable. Complementary information
may include the company’s vision, values
and strategy to achieve its mission or a
summary of corporate goals and priorities
for the upcoming year, including financial
and operating objectives (see C8).
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, the vast
majority (92%) of the companies provided
some information on corporate mission in
2004-2005. Although some offered quite
specific information, most provided only a
very general overview. Mission information
was presented in various places, including the
corporate profile, the president/CEO letter
and the review of operations.
According to the website survey results
presented in Chapter 12 and Appendix
D, 78% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006
(page 39) states that: “This year, financial
reporting judges focused on a number of
features in arriving at their evaluations of
each annual report: Judges looked for the
corporate…mission.... Most did a good job.”
AR TRENDS 2005 (page 8) states that this
information: “…can be used to place emphasis
on strategies, capabilities and market trends
that drive shareholder value.” A 2001 paper
examined the purpose of mission statements
and their intended audiences, as well as the
disclosure, length and components of mission
statements disclosed in annual reports.1
Study Group Deliberations
Although corporate missions, goals and
priorities vary considerably from one
company to another and across different
industries, they may provide some valuable
insights on the various risks a company faces,
as well as its expected profitability. This
information may also facilitate comparisons
with other entities in the industry and an
assessment of a company’s adaptive ability.
Knowing a company’s mission, goals and
priorities may also enhance user understanding
of the information presented in the annual
report. For example, such information could
provide a direct response to stock market
pressures for information on a change in
strategy or reaction to a threat of a takeover
bid, assist in establishing the amount, timing
and uncertainty of cash flows, and provide a
sound basis for evaluating performance.
There are, however, certain concerns with
presenting this information:
• The mission may be difficult to
communicate.
• Some companies may not have established
formal priorities or a defined strategy;
others may resist disclosure because
it might then be used in determining
accountability and stewardship.
• Due to the level of subjectivity involved, it
may be difficult to compare a company’s
objectives and mission to others in the
industry.
• It may place a company at a competitive
disadvantage.
Study Group Proposal
In the Study Group’s view, it is essential
that companies inform stakeholders
about their corporate mission in a broad
statement of their reason for being,
disclosing what they are, what they are
doing, why they are doing it and whether
they are sustainable.
Illustrative Examples
A2-Transat A.T. Inc., 2005 Annual Report
(comment)
A2-Boardwalk Real Estate Investment Trust,
2005 Annual Report (explanation)
A2-Potash Corporation of Saskatchewan
Inc., 2005 Annual Report — Financial Review
(analysis)
Corporate Reporting to Stakeholders

A3 — PRODUCTS, SERVICES AND
MARKETS
Definition
The extent of this type of information
depends on the nature of the company’s
business but could include a description of:
• principal products and services and the
relative importance of each to overall
operations;
• the location of the principal markets;
• the location and general characteristics of
the principal plants and other properties;
• the major distribution channels;
• significant customers;
• sources and availability of raw materials;
and
• trade/brand names.
Information on marketing approach
complements the information on a company’s
products, services and markets and may
encompass marketing strategy, marketing
arrangements and domestic and foreign
marketing approaches.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, most (88%) of
the companies provided such information in
2004-2005, usually as part of the corporate
profile or the segment review of operations.
According to the website survey results
presented in Chapter 12 and Appendix D, 66%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “Traditionally, information
on the nature of products and services and
location of operations has been provided
in this section. Many companies are now
Chapter 5 / Corporate Overview — Part A
disclosing this information only in the MD&A,
together with descriptions of how strategies
are being implemented. Leading companies
described what differentiates the company
from competitors, and provided information on
market size and penetration by the company.”
Study Group Deliberations
The annual report should serve to reinforce
the message brought home to customers in
their normal, day-to-day dealings with the
company. Describing products, services and
location of principal markets and plants is
essential to meeting user information needs.
Without it, users cannot adequately assess
risk and uncertainty (for example, related
to foreign operations), future prospects or
overall performance. Nor can they make
meaningful comparisons with other entities in
the same industry. From a user perspective,
such disclosure enriches understanding of
other information presented in the annual
report. From management’s perspective, such
information permits the annual report to serve
as a public relations document in showcasing
the company’s products and services.
Some would argue, however, that disclosure
of data on distribution channels, major
customers and sources and availability of
raw materials might result in a competitive
disadvantage. Nonetheless, the emphasis
investors and other stakeholders place on
this type of information suggests that it is
extremely relevant for informed decision
making and that the public interest benefits
override the related costs.
Study Group Proposal
In the Study Group’s view, it is essential
to inform stakeholders about principal
products and services, disclosing the
location of principal markets, plants and
properties, distribution channels, major
customers, raw material sources and trade/
brand names.
Illustrative Examples
A3-Domtar Inc., 2005 Annual Report
(comment)
A3-TELUS Corporation, 2005 Annual
Report — Business Review (explanation)
A3-Cascades Inc., 2005 Annual Report
(analysis)
A4 — COMPANY OWNERSHIP
AND CONTROL
Definition
This type of information may include the
following:
• identification of a company’s majority and
minority interests;
• identification of principal shareholders and
those with legal or effective control;
• distribution of shares on a geographic
basis (for example, nationally and/or
internationally).
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, less
than one-quarter (22%) of the companies
provided such information in 2004-2005. It
generally appeared at the back of the annual
report, after the audited financial statements.
Several companies, however, included such
information in their corporate profile.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 3% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
Past research has shown that individual
shareholders value information on ownership
and control. It has also shown that financial
analysts and institutional investors rank such
information as one of the most useful items in
the annual report. Furthermore, there may be
statutory restrictions on foreign ownership.
Study Group Deliberations
The existence of any large shareholdings
may constrain the actions of management
since the principal shareholders could have
effective control in determining a company’s
financial and operating policies. It is
important, therefore, for investors, creditors
and other stakeholders to know how a
company’s ownership is allocated so that they
can adequately evaluate the performance
of management, appraise the value of
their holdings and assess future prospects,
(also refer to E3 on “Corporate Directory”
regarding share holdings by directors). This is
especially true for minority shareholders.
Study Group Proposal
In the Study Group’s view, it is essential to
inform stakeholders about the company’s
ownership and control, disclosing
majority and minority interests, principal
shareholders and geographic distribution
of shares.
Illustrative Examples
A4-TELUS Corporation, 2005 Annual
Report — Financial Review (comment)
A4-Loblaw Companies Limited, 2005 Annual
Report (explanation)
A4-Legacy Hotels Real Estate Investment
Trust, 2005 Annual Report (analysis)
Corporate Reporting to Stakeholders

A5 — ORGANIZATIONAL STRUCTURE
Definition
Information on organizational structure
complements the corporate profile (see A1). It
identifies, for both domestic and international
operations, a company’s:
• major organizational units (subsidiaries,
joint ventures and associated companies);
• major operating divisions or lines of
business, together with geographical
locations.
Information on organizational units may
encompass a list of each major subsidiary as
at the fiscal year end, the nature of operations
and the incorporating jurisdiction, the
percentage of shares owned or over which
control/direction is exercised and the carrying
value, and the percentage of each class of
non-voting securities owned. Disclosure might
also include the nature and extent of any
practical or legal restrictions on the ability of
a subsidiary to transfer funds to the company,
and the impact such restrictions have had,
and are expected to have, on its ability to
meet its obligations.
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, the
vast majority (88%) of companies provided
information on their organizational structure
in 2004-2005. Often presented as a chart or
table, such information was usually near the
corporate profile or, alternatively, near the
back of the annual report after the audited
financial statements.
According to the website survey results
presented in Chapter 12 and Appendix D, 43%
of the companies provided such information on
their investor relations webpage or elsewhere.
Chapter 5 / Corporate Overview — Part A
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “This year, financial reporting
judges focused on a number of features in
arriving at their evaluations of each annual
report: Judges looked for …a bird’s eye
view of the organization.... Most did a good
job.” It also notes that: “Winning companies
gave detailed information on items such as:
...subsidiaries/affiliates...”
Some companies do not want to disclose such
information, fearing that it would place them
at a competitive disadvantage. Nevertheless,
information on major business units is
considered highly relevant to investors and
other stakeholders because it provides a more
precise divisional focus for decision making.
Its importance is noted in numerous studies.
Study Group Deliberations
In combination with the corporate profile
(see A1), information on organizational
structure unravels the company, allowing
an evaluation — by division or line of
business — of past performance, future
prospects, financial strength and stability, and
risk and uncertainty. It enables more direct
comparisons with other diversified companies
and helps shed light on a company’s response
to change. In addition, there may be legal or
other restrictions on the free flow of funds
from subsidiaries or divisions. Consequently,
identifying the major organizational units
and operating divisions permits a better
understanding of the operations of a
diversified company.
Study Group Proposal
In the Study Group’s view, it is important to
inform stakeholders about the company’s
organizational structure, identifying
domestic and/or international operations,
the major organizational units and
operating divisions or lines of business.
Illustrative Examples
A5-Sobeys Inc., 2005 Annual Report
(comment)
A5-TransAlta Corporation, 2005 Annual
Report (explanation)
A5-ONEX CORPORATION, 2005 Annual
Report (analysis)
A6 — MANAGEMENT TEAM
Definition
Information outlining the internal management
structure complements the information on
the organizational structure (see A5). It
would describe any significant changes in
organizational units or in key management
personnel during the year, often including
the names of senior officers (also see A7 on
management committees).
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, nearly all (96%)
of the companies provided information on the
management team in 2004-2005.
According to the website survey results
presented in Chapter 12 and Appendix D, 23%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “Winning companies gave
detailed information on items such as: ...the
management team…”
A landmark report by the UN Working Group
of Experts noted the importance of people,
especially senior management, to the overall
success of any business. It also concluded that
the effectiveness of management is sometimes
determined by the organizational structure. 2
Study Group Deliberations
Information on strategic changes in
organizational units or in key management
personnel may assist investors and other
stakeholders in evaluating management
quality and stewardship, future prospects,
risk and uncertainty and overall adaptive
ability. Information on the management
structure may also help to convey the degree
of centralization for management decision
making.
Study Group Proposal
In the Study Group’s view, it is important to
inform stakeholders about the company’s
management team, giving the names of
senior officers and outlining any significant
changes in organizational units or in key
management personnel during the year.
Illustrative Examples
A6-Angiotech Pharmaceuticals Inc., 2005
Annual Report (comment)
A6-Transat A.T. Inc., 2005 Annual Report
(explanation)
A6-Agrium Inc., 2005 Annual Report
(analysis)
Corporate Reporting to Stakeholders

A7 — MANAGEMENT COMMITTEES
Definition
Information on management committees
is interrelated with information on the
management team (see A6). It may
encompass:
• identification of key, high-level
management committees (for example,
human resources committee, risk
management committee);
• a brief explanation of the purpose of each
committee and the current members.
Survey Results
According to the survey results in Chapter 4
and Appendix B, less than one-third (32%) of
the companies provided such information in
2004-2005, most commonly at the back of
the annual report after the audited financial
statements.
Other Sources of Reference
Previous research has noted the importance
of providing investors and other stakeholders
with information on key management
committees. Regulatory reporting
requirements in virtually all Canadian
jurisdictions also call for such information.
Study Group Deliberations
Information about management committees
may reflect the dynamism, experience
and skills of those controlling operations.
Accordingly, it may be helpful for investors
and other stakeholders to know who is
managing a company. It may also help assess
risk and uncertainty; facilitate evaluation of
management’s stewardship and performance;
permit comparisons with management of
other entities in the industry; and aid in
meeting statutory and regulatory reporting
requirements.
Chapter 5 / Corporate Overview — Part A
Study Group Proposal
In the Study Group’s view, disclosing
information to stakeholders about the
company’s management committees
is discretionary. When provided, such
disclosures may include the name and
the purpose of each committee,
as well as the members.
Illustrative Examples
A7-CGI Group Inc., 2005 Annual Report
(comment)
A7-Transcontinental Inc., 2005 Annual Report
(explanation)
A7-Bank of Nova Scotia, 2005 Annual Report
(analysis)
A8 — COMPARATIVE FINANCIAL
HIGHLIGHTS
Definition
Comparative information (usually two or three
years) on financial highlights (see also the
historical summary in D11 and performance
measures in D12) may encompass, in brief:
• results of operations, financial position
and cash flow data;
• per share data;
• financial ratios;
• percentage change data;
• graphs, charts and tables.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, nearly all (97%)
of the companies provided such information
in 2004-2005, usually at the front of the
annual report, in the first few pages.
According to the website survey results
presented in Chapter 12 and Appendix D, 15%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “This year, financial reporting
judges focused on a number of features in
arriving at their evaluations of each annual
report: Judges looked for …summary of key
financial and operating highlights.... Most did
a good job.”
The research literature shows that individual
shareholders value comparative financial
highlights. Professional users, such as financial
analysts and institutional investors, rank
such information among the most useful
disclosures in the annual report.
Study Group Deliberations
Financial highlights are summaries of
operational and financial activity for a
financial year. They convey a company’s
recent story at a glance, providing qualitative
and quantitative data, including earnings-per-
share, financial ratios and comparative figures
(current versus prior year, sometimes with
percentage of change), which give investors
and other stakeholders an easy-to-digest
overview of operations over the past year. It
is readily apparent that such information is
useful to readers of annual reports.
Study Group Proposal
In the Study Group’s view, it is desirable
to provide stakeholders with comparative
financial highlights on the company’s
results of operations, financial position,
cash flow and per share data. Such
disclosures may include financial ratios,
percentage change data and graphic
presentations.
Illustrative Examples
A8-MDS Inc., 2005 Annual Report (comment)
A8-High Liner Foods Incorporated, 2005
Annual Report (explanation)
A8-Transcontinental Inc., 2005 Annual Report
(analysis)
A9 — PRESIDENT/CEO LETTER
Definition
The president or CEO letter may encompass
any matters considered relevant to investors
and other stakeholders. It would normally
include:
• a summary of key or unusual events
during the year that had a significant
impact on the company (see C1 and C2);
• an overview of the company’s
performance for the past year (see C1 and
C2);
• a brief outlook discussing future prospects
(see A11).
The commentary may address the company’s
mission (see A2), objectives and strategic
plans (see C8) and recurring themes such
as market growth, changing product mix,
imminent losses or gains, positive references
to the forthcoming year or years ahead, and
environmental constraints (see B3).
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, all of the
companies provided a president/CEO letter,
usually as one of the first items in the annual
report. Such an address has become standard
practice.
According to the website survey results
presented in Chapter 12 and Appendix D, 16%
of the companies provided such information
Corporate Reporting to Stakeholders
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “The Chair’s letter reviews
Board membership and governance. The best
CEO’s letters were strategic and assessed
progress in achieving goals. Company
developments, performance and risk were
also reviewed. Again, more separate letters
were noticed this year.
AR TRENDS 2005 (page 10) states that: “The
messages to shareholders should provide a
candid, strategic and insightful look into your
business. We say ‘messages’ because it is
becoming increasingly common for annual
reports to contain separate letters from the
CEO, Chairman of the Board and CFO. The
best letters carry the voice of the individual
who signs his or her name at the bottom.”
A number of studies have shown that most
users read the president/CEO letter because it
comes from those who play a leadership role
in the organization. 3 Studies have found that
there is considerable potential for inclusion
of information that is beneficial to investors
and other stakeholders, including investment
analysts and financial advisors.
Study Group Deliberations
Substantial corporate resources are devoted
to developing and disseminating the
annual report. The president/CEO letter to
shareholders occupies a prominent position.
It covers matters addressed elsewhere in
the report but provides a useful overview.
Typically, the letter summarizes key events
and reviews performance for the past fiscal
year, then concludes with a brief discussion of
the company’s prospects.
Clearly, there is a direct link between the
letter to shareholders and the objectives
Chapter 5 / Corporate Overview — Part A
of corporate reporting (refer to Chapter 2).
Because of the potential wealth of information
that this letter might contain, it is perceived to
communicate useful information to investors
and other stakeholders. It is apparent that
there are no disadvantages to providing
this type of information since virtually all
companies include a president/CEO letter in
their annual report.
Study Group Proposal
In the Study Group’s view, it is essential
that companies provide investors and
other stakeholders with a letter from
the president or CEO containing an
overview of performance for the past year,
summarizing key or unusual events and
discussing future prospects.
Illustrative Examples
A9-Inmet Mining Corporation, 2005 Annual
Report (comment)
A9-Suncor Energy Inc., 2005 Annual Report
(explanation)
A9-Cameco Corporation, 2005 Annual Report
(analysis)
A10 — COMMENTARY ON INDUSTRY
AND ECONOMY
Definition
This type of information, which depicts
a company’s industry and the economic
environment, may include:
• economic factors relevant to the industry
(for example, interest and exchange rates,
government policy – see C1 and C2);
• broad characteristics of the industry (for
example, cyclical, capital intensive – see
D4);
• recent trends in the industry (for example,
supply and demand);
• significant risks or uncertainties
in the industry (for example, new
technology — see C7).
Survey Results
According to the survey results in Chapter 4
and Appendix B, more than three-quarters
(78%) of the companies provided industry
and/or economy information in 2004-2005,
commonly as part of the review of operations.
Often, it was mentioned briefly in the
president/CEO letter.
According to the website survey results
presented in Chapter 12 and Appendix D, 25%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “Leading companies described
what differentiates the company from
competitors, and provided information on
market size and penetration by the company.”
The Canadian Securities Administrators
recognize the importance of disclosing
information on the industry and the economic
environment, now requiring such information
under National Instrument 51-102F1.4
Study Group Deliberations
Different industries have different levels
of profitability, economic prospects, types
and degrees of risk and capital investment
requirements. To more readily understand
the activities reflected in the annual report
and to make valid comparisons with similar
entities within an industry, investors and other
stakeholders need to be aware of its broad
characteristics.
Background information on industry provides
context and allows diverse user groups to
better understand the other information in
the annual report. It provides a focus for
decision making and establishes a perspective
for evaluating a company’s performance. It
also helps in making various comparisons and
determining compliance with regulations.
Management should have information
about important aspects of the economic
environment within which its company
operates. Such information is significant
not only to management decisions but also
to users’ evaluations of future prospects,
financial strength and stability. In fact,
it is fundamental to the assessment and
interpretation of financial statements.
Study Group Proposal
In the Study Group’s view, it is desirable
that companies provide stakeholders with
a commentary on the industry and/or the
economy in which they operate, discussing
matters such as recent trends, risks and
uncertainties and/or economic factors.
Illustrative Examples
A10-Freehold Royalty Trust, 2005 Annual
Report (comment)
A10-Finning International Inc., 2005 Annual
Report (explanation)
A10-Barrick Gold Corporation, 2005 Annual
Report (analysis)
Corporate Reporting to Stakeholders

A11 — OUTLOOK
Definition
Outlook information assesses the corporate
mission (see A2) in light of the commentary
about the industry and the economy (see
A10) and other forward-looking information
(see C6). It discloses future prospects,
covering both the year ahead and the
operating or business cycle.
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, all of
the companies provided some information
regarding future prospects. This was
commonly located in the president/CEO
letter, in the overall review of operations
(see C1), or segment review (see C2).
Unfortunately, the majority of disclosures are,
at best, a general indication of whether the
operating results will be better or worse than
the previous year.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 4% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “The best CEO’s letters were
strategic and assessed progress in achieving
goals. Company developments, performance
and risk were also reviewed. Again, more
separate letters were noticed this year.”
AR TRENDS 2005 (page 14) notes the
importance of providing a roadmap to
the future. It states that: “Knowledge of
your industry, strengths and market trends
provides only half the investment scenario for
your company. Investors need to understand
Chapter 5 / Corporate Overview — Part A
the strategies and tactics that your company
has developed to translate those trends and
strengths into growth in shareholder value.”
The Canadian Securities Administrators are
well aware of the importance of disclosing
forward-looking information, requiring it
under NI 51-102F1. 5
Study Group Deliberations
Disclosure of future prospects encompasses
currently known trends, events and
uncertainties that are likely to have an impact
on a company’s activities in the near future,
for example, known future increases in
costs of labour or materials. Prospects vary
considerably from company to company,
within an industry sector and across different
industries (for example, rates of profitability,
risk and capital investment requirements).
Outlook information conveys the informed
“internal” views of management to the
“external” users. Management is, undoubtedly,
in the best position to foresee the future,
to indicate expected operating results and
to report the existence of significant events
that are likely to affect those results. Such
forward-looking information is clearly of
benefit to most, if not all, stakeholders.
Nevertheless, there are several concerns:
• future prospects may be extremely
difficult to quantify;
• management may be reluctant to provide
“bad news” during an economic downturn;
• information may be useful to competitors,
resulting in a competitive disadvantage;
• the company may be required to publicly
withdraw or update previously disclosed
forward-looking information if it becomes
misleading;
• the current litigious environment may
discourage companies from disclosing any
forward-looking information.
 Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with the company’s outlook, disclosing its
future prospects for the year ahead and
the operating or business cycle.
Illustrative Examples
A11-AltaGas Income Trust, 2005 Annual
Report (comment)
A11-Cascades Inc., 2005 Annual Report
(explanation)
A11-TELUS Corporation, 2005 Annual Report
— Financial Review (analysis)
CONCLUSION
The first major category of information in
the corporate reporting framework is the
Corporate Overview, which conveys what
the company is all about and the economic
environment within which it operates. The
Study Group concludes that companies
should consider providing information on:
corporate profile; corporate mission; products,
services and markets; ownership and control;
organizational structure; management
team and management committees. In
addition, they should provide: comparative
financial highlights; a president/CEO letter;
commentary on industry and economy; and
information about their outlook.
Appendix C offers guidance for
communicating such information. It poses a
series of questions that merit consideration
if corporate reporting is to meet, more
effectively, the information needs of investors
and other stakeholders.
Corporate Reporting to Stakeholders
 Notes:
1. Refer to David Campbell, Philip Shrives and
Heike Bohmbach-Saager, “Voluntary Disclosure
of Mission Statements in Corporate Annual
Reports: Signaling What and To Whom,”
Business and Society Review 106:1 (2001), pp.
65-87.
2. “Information Disclosure Requirements
Concerning the Annual Report of the Board
of Directors,” International Accounting and
Reporting Issues: 1989 Review (New York:
United Nations, 1990), Chapter IV, pp. 56-70.
This report sets out the conclusions of the UN
Intergovernmental Working Group of Experts
on International Standards of Accounting and
Reporting.
3. For example, see Mark Clatworthy and Michael
John Jones, “Financial reporting of good news
and bad news: evidence from accounting
narratives,” Accounting and Business Research,
Vol. 33 No. 3 (2003), pp. 171-185. This paper
notes that accounting narratives, such as
the chairman’s statement in the UK or the
president’s letter in the US, typically occupy
prime positions within the annual report. They
allow management to present a serial, annual
description of corporate financial performance
and play a crucial role in the corporate annual
report. Research suggests that such narratives
are widely used and considered important in the
investment decisions of private and institutional
investors. Accounting narratives are unaudited,
however, and thus may be subject to impression
management. This paper focuses on the
chairman’s narratives of the top 50 and bottom
50 listed UK companies ranked by percentage
change in profit before taxation. The research
examines whether companies with improving
and declining performance report good and bad
news in different ways.
Chapter 5 / Corporate Overview — Part A
4. The Canadian Securities Administrators, under
NI 51-102F1 Management’s Discussion and
Analysis, call for disclosure such as “industry
and economic factors affecting your company’s
performance” (Part 2, Section 1.2(c)) and “effect
of inflation and specific price changes on your
company’s net sales and total revenues and on
income or loss before discontinued operations
and extraordinary items” (Section 1.4(h)).
5. The Canadian Securities Administrators, under
NI 51-102F1 Management’s Discussion and
Analysis, call for disclosures on forward-looking
information (Part 1, Section (g)). Companies
are encouraged to provide forward-looking
information if they have a reasonable basis for
making the statements. Preparing an MD&A
necessarily involves some degree of prediction
or projection. For example, MD&A requires a
discussion of known trends or uncertainties that
are reasonably likely to affect the company’s
business. MD&A does not, however, require
that the company provide a detailed forecast
of future revenues, income or loss or other
information. All forward-looking information
must contain a statement that the information
is forward-looking, a description of the factors
that may cause actual results to differ materially
from the forward-looking information, the
material assumptions and appropriate risk
disclosure and cautionary language. Companies
must discuss any forward-looking information
disclosed in MD&A for a prior period which, in
light of intervening events and absent further
explanation, may be misleading. Forward-looking
statements may be considered misleading when
they are unreasonably optimistic or aggressive,
or lack objectivity, or are not adequately
explained. Timely disclosure obligations might
also require the issuance of a news release and
filing of a material change report.
 Chapter 6
Corporate Social
Responsibilities — Part B
The second major category
of information in the
Framework for Corporate
Reporting is Corporate
Social Responsibilities. It
explains how the company
is meeting its social
responsibilities to the
public.
INTRODUCTION
As the growing literature on the subject shows, academics
are currently quite interested in accounting for sustainability
and decision making. There is also increasing recognition
that accountants have an important role to play in this area,
as demonstrated by the work leading accounting bodies are
doing to engage the profession in sustainability issues.
The research literature identifies a variety of indicators and
frameworks developed to promote and reflect sustainability
including, for example:
• the “Ecological Footprint” to help conceptualize
sustainability and provide a useful starting point for
organizations beginning to consider their environmental
impacts;
• the “Triple Bottom Line” that combines economic,
environmental and social considerations to promote
eco-efficiency, fair trade and environmental justice;
• the “Balanced Scorecard” and “Sustainability Balanced
Scorecard” that use strategy maps to integrate
sustainability into decision-making processes; and
• the “Sustainability Assessment Model” that uses the
concept of full-cost accounting, translating all internal
and external costs into financial values to measure the
sustainability of a company’s specific projects.
Although the literature suggests many possible approaches
to accounting for sustainability, there is no consensus on the
best way forward. Further thought and discussion are needed
to develop a system that will fully integrate sustainability into
decision making, accounting and reporting processes, building
on the work that has already been done.
It is evident that the accounting profession recognizes that it
has an important role to play in this scenario. For example:
• The Institute of Chartered Accountants in England and
Wales (ICAEW) has, as part of its Information for Better
Corporate Reporting to Stakeholders
 Markets series of publications, provided
guidance to its members on the type
of services likely to be required in a
world where sustainability reporting is
commonplace.
• The Fédération des Experts Comptables
Européens (FEE), which has been active
in sustainability accounting since 1993,
has produced a number of studies and
publications on the subject.1
• The Chartered Institute of Public Finance
and Accountancy (CIPFA) has published
Sustainability: A Reporting Framework
for the Public Services, a model of
sustainability reporting that any public
sector organization can apply when
considering and reporting on organizational
and service-level sustainability.
• The Association of Chartered Certified
Accountants (ACCA) and the Chartered
Institute of Management Accountants
(CIMA) have published a variety of papers
that consider how to include sustainability
measures in traditional financial reporting,
including Full Cost Accounting, Triple
Bottom Line reporting and Balanced
Scorecard methodologies, as well as a
selection of hybrid approaches.
• The International Federation of
Accountants (IFAC) has created two
sustainability working groups and has
launched a three-year sustainability
program via its Professional Accountants
in Business Committee. It has also issued
guidance on environmental management
accounting and to professional
accountants globally on the nature of
their professional interaction with the
sustainability debate.
• The Canadian Institute of Chartered
Accountants (CICA) has addressed
Chapter 6 / Corporate Social Responsibilities — Part B
measurement and reporting issues on
the environment and sustainability in
various research studies and reports. 2 It
also introduced sustainability reporting
as a judging category in the Corporate
Reporting Awards in 1993, underscoring
the importance of transparency in how
companies integrate all dimensions of
sustainability into their business activities. 3
A number of initiatives have addressed
corporate “standalone” environmental or
sustainability reports.4 These include, for
example, the Dow Jones Sustainability Index
(DJSI) and the Global Reporting Initiative
(GRI). Established in 2002, the DJSI defines
corporate responsibility as “a business
approach that creates long-term shareholder
value by embracing opportunities and
managing risks deriving from economic,
environmental and social developments.”5 The
GRI, considered the dominant source of “best
practice” for sustainability reporting,6 gained
international recognition in 1999 when it was
chosen to partner with the United Nations
Environment Program (UNEP).7 By 2001,
the GRI had released its second iteration
of guidelines for sustainability reporting.
Adherence to the GRI principles of reporting
is not, however, the same as achieving
sustainability. Accordingly, the GRI released
its G3 Indicator Protocols in 2006, which
includes indicators on economic sustainability,
environment, human rights, labour, product
responsibility and society.8
“A crucial issue in changing the behaviour of
companies is persuading or requiring them
to give more information to consumers about
key environmental and social issues, such as
the greenhouse-gas cost of their products
and services. It is, perhaps, only through
consumers and shareholders having access to
such information, that organizations will come
under real pressure to change.” 9
Sharing this view, Canada’s National Round
Table on the Environment and the Economy
(NRTEE) published a report in February
2007 on Capital Markets and Sustainability:
Investing in a Sustainable Future.10 The
NRTEE report encourages the investment
community, governments, regulators and
corporations to enhance the integration of
environmental, social and governance (ESG)
factors in capital allocation decisions and
the inclusion of material ESG information
in corporate financial reporting. Many of
the recommendations in the NRTEE report
echo views held by the CICA, which for
more than 15 years has been contributing
to and recognizing best practices in the
measurement and reporting of corporate
sustainability performance.11
As Exhibit 6.1 shows, corporate social
responsibilities include human resources,
social and environmental responsibilities.
This chapter defines each type of
information and surveys current practice.
Other sources of reference are considered,
as well as authoritative pronouncements
and regulatory requirements, if any. The
Study Group’s deliberations and proposals
on the relative importance to investors
and other stakeholders follow, along with
illustrative examples of the different levels of
disclosure discussed in Chapter 4 — comment,
explanation and analysis.
Exhibit 6.1
CORPORATE SOCIAL RESPONSIBILITIES
B1 — Human Resources
B2 — Social Responsibilities
B3 — Environmental Responsibilities
B1 — HUMAN RESOURCES
Definition
Human resources information comprises:
• personnel data (e.g., total number of
employees and pension benefits);
• labour relations, pay equity and fair
business practices;
• recruiting programs, staff training, career
planning and professional development;
• productivity measures and capital/labour
ratios;
• “key person” insurance; and
• efforts to improve management/employee
communications.
Some organizations may also provide
supplementary data on improving the work
environment and related job satisfaction;
health and safety record and initiatives;
employee appreciation; and employee
services.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, the majority
(89%) of the companies provided selected
information on their human resources in
2004-2005. Some made general mention
in the president/CEO letter, while others
presented such information in a separate
section of the annual report. The information
disclosed most often was the number of
employees, labour relations and staff training.
According to the website survey results
presented in Chapter 12 and Appendix D, 78%
of the companies provided such information
on their investor relations webpage or
elsewhere (most of the information was about
careers available in the company).
Other Sources of Reference
As far back as 1977, an “employment
statement” indicating a company’s manpower
Corporate Reporting to Stakeholders
resources and policies was recommended
for annual reports in the United Kingdom.12
Internationally, the 1987 OECD Working
Group on Accounting Standards study on
the Disclosure of Information by Multinational
Enterprises — Survey of the Application of the
OECD Guidelines noted that certain employee
information was required under EEC
Directive 4 and that 90% of the 184 surveyed
companies (from 12 countries) provided it
in their annual report. Canadian securities
regulators, however, have given relatively little
attention to the need to disclose information
on human resources.13
Study Group Deliberations
Often, the management of human
resources is crucial to an organization’s
future success. Good labour relations and
an efficient workforce are paramount.
Only if employees are satisfied with the
conditions of employment, training and
treatment they receive can a company hope
to achieve satisfactory results in the long
run. Accordingly, information on employee
matters is important to anyone interested in a
company’s long-term prospects.
The relevance of employee-related
information depends on the types of decisions
that investors and other stakeholders are
making. From a shareholder’s point of view,
employee-related information is likely to be
important because the direct and indirect
costs (including wages, employee benefits
and post-retirement benefits) can have a
major impact on operations. Employee-related
cost information is, therefore, fundamental to
the interpretation of current operating results
and assessment of likely future results.
Chapter 6 / Corporate Social Responsibilities — Part B
Rates of profitability and economic prospects
of certain industries largely depend on
retaining qualified personnel. Therefore, in
addition to financial information, investors
and other stakeholders also want to know
about the management of human resources
(for example, recruiting qualified personnel
and preparing for succession). This suggests
that management should have a formal
commitment to supporting employee growth
and development. On the other hand, some
cite concerns with the general sensitivity of
providing information on human resources
(particularly personnel data, labour relations
and management/employee matters) and
the possibility that such data may lend itself
to inappropriate analysis. In view of this
divergence, a separate study of this area
seems warranted.
Study Group Proposal
In the Study Group’s view, it is desirable
to provide stakeholders with some human
resources information, such as the size of
workforce, labour relations, compensation
and pay equity, staff training and
retention, productivity measures and
efforts to improve management/employee
communications.
Illustrative Examples
B1-Stantec Inc., 2005 Annual Report
(comment)
B1-Cambior Inc., 2005 Annual Report
(explanation)
B1-Potash Corporation of Saskatchewan Inc.,
2005 Annual Report (analysis)

B2 — SOCIAL RESPONSIBILITIES
Definition
Social responsibility, which is interrelated
with human resources information (see B1),
comprises:
• the overall commitment by the “corporate
citizen” to community involvement;
• the company’s participation in, and
support of, community education, sports
and culture, housing, medical and social
services, and charitable causes; and
• the corporate position on “sustainable
economic growth and development” (see
B3 on environmental responsibilities).
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, more than
two-thirds (71%) of the companies provided
information on social responsibilities in
2004-2005, presented in various places
throughout the annual report.
According to website survey results in
Chapter 12 and Appendix D, 63% of the
companies provided some information about
their social responsibilities, 47% provided
information about their involvement with
their communities and 25% provided
information about sustainable economic
growth and development.
Other Sources of Reference
The Corporate Reporting Awards 2005
(page 38) states that: “Winning companies,
for example, provide detailed information
on: …Social responsibility (Some companies
provide clear reference in the annual report
to separate or additional disclosures in the
Management Information Proxy/Circular.
Many do not).”
AR TRENDS 2005 (page 20) notes the
importance of sustainability and corporate
responsibility, saying that: “In recent years,
sustainability reporting has not only been
expanding, it is beginning to dominate many
annual reports. Common in natural resource
industries, companies in many sectors of the
economy are now reporting on the impact
of their relationship with the environment,
employees, customers, suppliers and
communities on their long term ability to
build shareholder value.”
It is now recognized that a business occupies
a specialized role in society — its actions have
direct consequences for many groups. The
general public and government regulatory
bodies are becoming more sensitive to the
social responsibility of public companies.14
Enlightened shareholders are taking
increased account of the social management
policies of corporations they are interested
in. Indeed, some use social responsibility
information in making “ethical investing”
decisions and that may well affect the cost
of capital.
Study Group Deliberations
A key external constraint to long-term
success is public attitude toward a company
and its products and services (also see A3
and B3). Public attitude may be conditioned
by philanthropy and by prevailing social
values and needs. Accordingly, corporations
are recognizing the importance of making
a strong commitment to promote and to
support the well-being of the communities
that are the essence of their success. By
playing a role in education, health, social
service, environment, sports, arts and culture,
they serve community needs and enrich the
society in which we live.
Social responsibility information
communicates a company’s contribution to
the community, society and national goals.
It may assist users in assessing management
quality and overall performance. It may
Corporate Reporting to Stakeholders
also facilitate comparisons and determining
compliance with specific regulations.
A separate study of social responsibility
disclosure seems warranted in light of the
growing sensitivity of the general public
and government regulatory bodies, and
a developing trend toward using social
responsibility information for making ethical
investing decisions.
Study Group Proposal
In the Study Group’s view, disclosing social
responsibilities information to stakeholders
is discretionary. When companies
provide such disclosures, it may include
their overall community involvement,
philanthropy and sustainable economic
growth and development.
Illustrative Examples
B2-CGI Group Inc., 2005 Annual Report
(comment)
B2-Royal Bank of Canada, 2005 Annual
Report (explanation)
B2-Talisman Energy Inc., 2005 Corporate
Responsibility Report (analysis)
B3 — ENVIRONMENTAL
RESPONSIBILITIES
Definition
Environmental responsibility information
encompasses:
• environmental policy and risk
management;
• impact of operations on the environment
(such as climate change);
• environmental issues that are pertinent to
the industry (see A10, C1 and C2);
• initiatives regarding air, water, and/or land
pollution abatement;
Chapter 6 / Corporate Social Responsibilities — Part B
• environmental expenses (both operating
and capital) or contingencies (see C7);
and
• applicable legislation and other
environmental protection measures.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, more than two-
thirds (71%) of the companies reported on
environmental responsibilities in 2004-2005.
Current practice, however, varies considerably.
In some industries (for example, paper and
forest products), most of the companies
provided such information. In other industries
(for example, real estate and construction),
very few companies did so.
According to the website survey results
presented in Chapter 12 and Appendix D, 36%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2005 (page
38) states that: “Winning companies, for
example, provide detailed information on:
Sustainable development (Some companies
provide clear reference in the annual report
to separate or additional disclosures in the
Management Information Proxy/Circular. Many
do not).”
AR TRENDS 2005 (page 20) notes the
importance of sustainability and corporate
responsibility: “In recent years, sustainability
reporting has not only been expanding,
it is beginning to dominate many annual
reports. Common in natural resource
industries, companies in many sectors of the
economy are now reporting on the impact
of their relationship with the environment,
employees, customers, suppliers and
communities on their long term ability to
build shareholder value.”
Environmental responsibility has become
a major public concern as evidenced by
the growing demand for environmentally
friendly products and production methods
and expanded regulatory requirements.
For example, the Canadian Securities
Administrators recognize the importance
of environmental disclosure by asking
companies to complete an annual information
form reporting any risk factors, including
environmental and health risks. What
constitutes such risks is not defined, but
companies must report whether they have
implemented environmental policies that
are fundamental to operations. Companies
must also report the financial and operational
effects of environmental protection
requirements on capital expenditures,
earnings and competitiveness in the current
and future years.15
Sharing the public’s concern, the CICA
published a discussion brief in 2006, MD&A
Disclosure about the Financial Impact of
Climate Change and Other Environmental
Issues. This leading-edge work was referenced
in the Conference Board of Canada’s Carbon
Disclosure Project Report 2006 Canada 280
and in the Carbon Disclosure Project Report
2006 Global FT500, issued by the Carbon
Disclosure Project and Innovest Strategic
Value Advisors on behalf of 225 investors
worldwide, with assets of $31 trillion.
Study Group Deliberations
Information on environmental responsibility
enables investors and other stakeholders to
better understand the nature of operations
of companies in certain industries, the
potential impact on cash flows and the ability
to effectively manage environmental risks.
Disclosing such information may facilitate
assessment of a company’s risks and
uncertainties, future prospects and financial
stability, response to change, compliance with
regulations and contribution to society. It also
enables comparisons with other entities, the
industry and the economy.
Nonetheless, there are major roadblocks
to better disclosure of environmental
responsibility information:
• It is difficult to define the nature and
extent of environmental issues and to
quantify the related costs. The problems
are more than company or industry
specific — they have a global impact.
• There are relatively few accounting/
reporting standards in this area (although
industries such as mining, and oil and gas
are required to account for removal and
restoration costs).
In view of these significant drawbacks, a
separate study of this area seems warranted.
Study Group Proposal
In the Study Group’s view, it is
important to provide stakeholders with
environmental responsibilities information,
such as environmental policies, the
impact of operations on the environment,
environmental risk management, expenses
or contingencies, climate change and
applicable legislation.
Illustrative Examples
B3-Abitibi-Consolidated Inc., 2005 Annual
Report (comment)
B3-Agnico-Eagle Mines Limited, 2005 Annual
Report (explanation)
B3-Alcan Inc., 2005 Sustainability Report
(analysis)
Corporate Reporting to Stakeholders
CONCLUSION
Notes:
The second part of the corporate reporting
framework addresses Corporate Social
Responsibilities. It explains how companies
meet their social responsibilities to the public.
The Study Group concluded that companies
should consider providing information on
human resources, social responsibilities and
environmental responsibilities.
Appendix C offers guidance for
communicating such information. It poses a
series of questions that merit consideration
if corporate reporting is to meet, more
effectively, the information needs of investors
and other stakeholders.
According to the CICA Corporate Reporting
Awards program, sustainability reporting
has become increasingly relevant to
stakeholders. Sustainability reporting is
about measuring, disclosing and being
accountable for organizational economic,
environmental and social impacts. A diverse
range of stakeholders, including investors,
is now demanding transparency about the
sustainability of organizational activities.
In response, new global reporting standards
are being developed to provide assurance
on matters such as the financial implications
of climate change. Most organizations are,
however, still in the start-up phase when it
comes to sustainability reporting. They are
trying to find their way in managing and
reporting on corporate social responsibilities,
which might mean something different for
each company. They are asking for guidance.
With the rising stakeholder expectation of
transparency, the Study Group concluded that
this area merits additional study.
Chapter 6 / Corporate Social Responsibilities — Part B
1. For example, refer to the FEE Paper “Key
Issues In Sustainability Assurance - An
Overview” (http://www.fee.be/publications/
default.asp?library_ref=4&content_ref=580).
This paper analyzes Swedish, French, Dutch
and German standards for assurance on
sustainability reports. The analysis is structured
by reference to the international framework
and the generic standard for assurance issued
by the International Federation of Accountants
(IFAC). The purpose is to highlight national
similarities and differences to assist national
and international standard setters in the
development of future standards.
2. For example, CICA publications include
Environmental Auditing and the Role of the
Accounting Profession (1992), Environmental
Costs and Liabilities: Accounting and Financial
Reporting Issues (1993), Reporting on
Environmental Performance (1994) jointly with
FEI Canada, Canadian Standards Association
and International Institute for Sustainable
Development, Full Cost Accounting from
an Environmental Perspective (1997), The
Measurement of Shareholder Value Creation
(1998), Strategic Performance Monitoring
and Management: Using Non-financial
Performance Measures to Improve Corporate
Governance (1998), Environmental Performance
and Shareholder Value Creation (1999),
Environmental Performance: Measuring and
Managing What Matters (2001) and Stakeholder
Relationships, Social Capital & Business Value
(2003).
3. Information on the CICA Corporate Reporting
Awards is available on the CICA website (http://
www.cica.ca/1/3/1/index1.shtml).
4. There is no standardized form of a stand-alone
environmental or sustainability report. In the UK,
the ACCA identified eight different categories
of stand-alone reports for addressing social
and environmental reporting. For example, the
titles used by one accounting firm for stand-
alone reports have changed from “environmental
reporting” to “sustainability reporting” to
“corporate responsibility reporting.”
5. Refer to the “Dow Jones Sustainability
Index, Corporate Sustainability” (http://www.
sustainability-index.com).
6. In 1997, Ceres launched the Global Reporting
Initiative (GRI), which has become the
international standard for corporate reporting
on the “triple bottom line” of economic, social
and environmental performance. GRI is an
independent institution, with 1,200 companies
using the guidelines (see http://www.
globalreporting.org/Home).
7. In addition to participating in many international
sustainability initiatives, the CICA is a founding
member of the Global Reporting Initiative (GRI).
8. The Association of Chartered Certified
Accountants and Ceres, a US-based coalition
of investors and environmental groups, present
annual Ceres-ACCA North American Awards
for Sustainability Reporting. The purpose of the
awards program is to acknowledge and publicize
best practice in reporting on sustainability,
environmental and social performance and
to provide leadership to companies that are
publishing or intend to publish sustainability
reports (see http://www.ceres.org/
sustreporting/).
9. The quote is from a speech by HRH the
Prince of Wales to launch his “Accounting for
Sustainability” project at St. James’s palace
on December 6, 2006. The Prince of Wales
established this project to develop systems
that will help both public and private sector
organizations account more accurately for the
wider social and environmental costs of their
activities (see http://www.princeofwales.gov.uk/
newsandgallery/news/hrh_launches_accounting_
for_sustainability_at_st_james_s_pal_1859677089.
html).
10. The report Capital Markets and Sustainability:
Investing in a Sustainable Future is available on
the NRTEE website (http://www.nrtee-trnee.ca/
eng/publications/capital-markets/index-capital-
markets-eng.htm).
11. The February 12, 2007 CICA press release
includes a “Chronology of CICA’s Climate
Change and Sustainability Initiatives” (see http://
www.cica.ca/index.cfm/ci_id/36164/la_id/1.htm).
12. “The Future of Company Reports,” a consultative
document presented to Parliament by the
Secretary of State for Trade by Command of
Her Majesty, London, July 1977, proposed that
large companies should publish in their annual
report an “employment statement” setting
out information about their workforce and
employment policies that are relevant not only
to employees but also to shareholders and
others concerned with the company. The aim
was to provide sufficient information about the
workforce and the way is managed to indicate
how effective management is in this crucial area
of corporate activities, as well as the way in which
the company is meeting its social obligations.
13. The Canadian Securities Administrators, under
NI 51-102F2 Annual Information Form, calls
for disclosure (Section 5.1(l)) of “The number
of employees as at the most recent financial
year-end or the average number of employees
over the year, whichever is more meaningful to
understand the business.”
14. The Canadian Securities Administrators, under
NI 51-102F2 Annual Information Form, call for
disclosure (Section 5.1(4)) of social policies “If your
company has implemented social or environmental
policies that are fundamental to your operations,
such as policies regarding your company’s
relationship with the environment or with the
communities in which it does business, or human
rights policies, describe them and the steps your
company has taken to implement them.”
15. The Canadian Securities Administrators, under
NI 51-102F2 Annual Information Form, call for
disclosure (Section 5.1(k)) of “The financial and
operational effects of environmental protection
requirements on the capital expenditures,
earnings and competitive position of your
company in the current financial year and the
expected effect in future years.” It also calls
for disclosure (Section 5.1(4)) of environmental
policies “If your company has implemented social
or environmental policies that are fundamental to
your operations, such as policies regarding your
company’s relationship with the environment or
with the communities in which it does business,
or human rights policies, describe them and the
steps your company has taken to implement
them.” Risk factors regarding environmental and
health risks must also be disclosed (Section 5.2).
Corporate Reporting to Stakeholders
 Chapter 7
Review of
Operations — Part C
The third major category
of information in the
Framework for Corporate
Reporting is the Review
of Operations. It discusses
what the company has
done and plans to do
and whether it has the
necessary financial and
other resources to achieve
its goals.
INTRODUCTION
Exhibit 7.1 lists the types of information allocated to
this category. It may comprise the overall review and
interpretation, segment review of operations, production
information, competitive conditions and response to change.
It may also include forward-looking information, risks and
uncertainties, financial and operating objectives, performance
compared to objectives, research and development, significant
agreements and contracts and industry specific data.
Exhibit 7.1
REVIEW OF OPERATIONS
C1 — Overall Review and Interpretation
C2 — Segment Review of Operations
C3 — Production Information
C4 — Competitive Conditions
C5 — Response to Change
C6 — Forward-looking Information
C7 — Risks and Uncertainties
C8 — Financial and Operating Objectives
C9 — Performance Compared to Objectives
C10 — Research and Development
C11 — Significant Agreements and Contracts
C12 — Industry Specific Data
This chapter defines each type of information and surveys
current practice. Other sources of reference are considered,
as well as authoritative pronouncements and regulatory
requirements, if any. The Study Group’s deliberations and
proposals on the relative importance to investors and other
stakeholders follow, along with illustrative examples of the
different levels of disclosure discussed in Chapter 4 — comment,
explanation and analysis.
Corporate Reporting to Stakeholders

C1 — OVERALL REVIEW
AND INTERPRETATION
Definition
Management’s overall review and
interpretation presents both a historical and
forward-looking qualitative analysis of the
business. The discussion and analysis focuses
specifically on known material events and
uncertainties that could undermine the ability
of historical information to indicate future
operating results. It would also refer to the
financial statements and any other statistical
data (such as financial highlights in A8 and
historical summary in D11) that help readers
understand a company’s operations.
Normally, the discussion would address
matters such as:
• operating results for the past two fiscal
years (also see D1, D3 and D5);
• risks and uncertainties expected within the
next two years (also see C7);
• significant new capital investment
by geographical area and, as far as
practicable, by major lines of business for
the company as a whole (also see D4);
• any government regulations and
monetary/fiscal policies having a direct
impact on operations.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, nearly all (98%)
of the companies provided such information
in 2004-2005. It was usually included in, or
immediately after, the president/CEO letter,
but preceding the segment review and the
audited financial statements.
According to the website survey results
presented in Chapter 12 and Appendix D, 21%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Chapter 7 / Review of Operations — Part C
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “the highlights should include
... a bird’s eye view of the organization, a
summary of key financial and operating
highlights ...”
AR TRENDS 2005 (page 8) states that: “An
at-a-glance can allow a company to achieve
a number of objectives. First, it can make it
easier for investors to understand a complex
company’s operations and objectives.
Second, it can be used to place emphasis on
strategies, capabilities and market trends that
drive shareholder value.”
The Canadian Securities Administrators
recognize the importance of such disclosure
and require it in NI 51-102F1.1
Study Group Deliberations
Management’s overall review and
interpretation provides a global look at a
company’s operations and performance,
addressing the two primary concerns of
investors — viability and profitability. If a
company is at all complex (for example,
having several divisions or product lines), the
general review section should clearly outline
the big picture before beginning the divisional
or segment reviews.
A general review facilitates broad
comparisons with other organizations in
the industry and across industries, both on
a historical and forward-looking basis. It
provides users with an understanding of the
major forces that contributed to the current
operating results and a general expectation
of what the coming year holds in store.
Such information paves the way for users
to more readily understand the operating,
financing and investing activities reported in
financial statements. It provides a focus for
economic decisions, facilitates evaluation of
management’s stewardship and performance,
and allows predicting, comparing and
evaluating potential cash flows.
Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with management’s overall review and
interpretation covering a historical and/or
forward-looking analysis of the business
and discussing material events and
uncertainties.
Illustrative Examples
C1-Agrium Inc., 2005 Annual Report
(comment)
C1-Enerplus Resources Trust, 2005 Annual
Report (explanation)
C1-Norbord Inc., 2005 Annual Report
(analysis)
C2 — SEGMENT REVIEW
OF OPERATIONS
Definition
This type of information presents a qualitative
review of operations along the company’s
lines of business or major industry segments
(see D2 for quantitative segment analysis). At
a minimum, it would normally discuss:
• major internal (corporate) and external
(industry/economy) developments in
the past fiscal year (for example, trends,
demands, acquisitions, cash needs or
other commitments, labour agreements);
• any legal or other restrictions on the flow
of funds between segments;
• any unique aspects of operations in
foreign countries;
• details of foreign business exposures and
impact of foreign currency transactions
and hedging;
• a brief outlook for the ensuing fiscal year.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, most (94%)
of the companies provided such information
in 2004-2005. The segment review of
operations usually followed the overall
review and interpretation of operations and
performance.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 4% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
Over the years, the importance of segmented
information has been noted in numerous
research papers and studies in Canada, the
United States and elsewhere. Investment
analysts have consistently argued in favour
of improved disaggregated data. Analysts
state that they use the disaggregated data
to help predict corporate profitability, usually
12 to 18 months into the future. They see the
segment review as an important element in
improving their understanding of a company
overall. Other research has confirmed
that segment reporting is necessary for a
proper understanding of a company and for
comparison with other companies in the same
industry, industry data and economic data.
The importance of such disclosures is
recognized by the Canadian Securities
Administrators, who require it under NI
51-102F1. 2
Study Group Deliberations
Corporate reporting will not provide adequate
information for user decision making if it
deals only with the performance and financial
position of the company as a whole. One
segment of the business may be subject to
different economic environments, prospects,
opportunities, risks and uncertainties
Corporate Reporting to Stakeholders
than another. Consequently, segmented
information becomes vital under volatile
market and economic conditions, merger and
acquisition activity and fluctuating currency
exchange rates.
Different companies identify their activities
differently, but the fact that these specific
areas are segregated from others provides
insight about how a company is managed.
It is not surprising, therefore, that segment
reporting is extremely diverse — some
companies that ought to disclose do
not, while others do not disclose at the
appropriate level of disaggregation. If a
company operates in several areas, its
financial reporting should be aimed at
segmentation, not simple consolidation. A
healthy-looking corporate whole may hide
a divisional weakness, and this should be
brought to the attention of investors and
other stakeholders so they can properly
understand the complexities of business
performance and prospects.
Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with a qualitative segment review of
operations based on how management
views the lines of business or industry
segments, addressing major developments
in the past fiscal year, unique aspects of
foreign operations and outlook for the
ensuing fiscal year.
Illustrative Examples
C2-TransCanada Corporation, 2005 Annual
Report (comment)
C2-CGI Group Inc., 2005 Annual Report
(explanation)
C2-Barrick Gold Corporation, 2005 Annual
Report (analysis)
Chapter 7 / Review of Operations — Part C
C3 — PRODUCTION INFORMATION
Definition
This type of information, which complements
a company’s products, services and markets
(see A3) as well as industry specific
information (see C12), may encompass:
• a description of the acquisition of raw
materials and components, indicating
percentage acquired from all inter-
company and foreign sources;
• average annual capacity utilization in
accordance with normal industrial practice;
• physical output by principal lines of
business; and
• ratio analysis on productivity or efficiency
(also see D12 on performance measures).
Survey Results
According to the survey results in Chapter 4
and Appendix B, more than two-thirds (68%)
of the companies provided such information
in 2004-2005, usually in the segment review
of operations section.
According to the website survey results
presented in Chapter 12 and Appendix D, 43%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
While it may not always be appropriate to
disclose this type of detailed information,
research has shown that investors and other
stakeholders find it useful. The importance
of such disclosures is recognized by the
Canadian Securities Administrators, who
require it under NI 51-102F1.3
Study Group Deliberations
Taking into account the nature of a business,
it may well be useful to disclose information
on the acquisition of raw materials, capacity
utilization, physical output in terms of quantity
or volume by major lines of business and
productivity or efficiency measures. A number
of companies already do this, providing
information in accordance with normal
practice in their industries.
The feasibility of providing such data will
depend on the type of operations involved.
For example, the more homogeneous the
products manufactured or sold, the more
feasible it is to produce volume data that is
especially useful where prices fluctuate. In this
situation, the volume of production or sales
may not move the same way that turnover or
profit does. Volume data becomes useful as
it provides extra information on a company’s
performance. Where prices are relatively
stable, however, changes in volume will be
more accurately reflected in changes in the
financial results; adding volume data provides
little or no new information.
Study Group Proposal
In the Study Group’s view, it is important
to provide stakeholders with production
information, such as practices regarding
acquisition of raw materials, capacity
utilization, physical output and
productivity or efficiency measures.
Illustrative Examples
C3-Freehold Royalty Trust, 2005 Annual
Report (comment)
C3-Abitibi-Consolidated Inc., 2005 Annual
Report (explanation)
C3-Methanex Corporation, 2005 Annual
Report (analysis)
C4 — COMPETITIVE CONDITIONS
Definition
This type of information encompasses:
• the relative market or industry position for
a company’s major products and services
(and any significant change from the prior
year);
• a discussion of competitive conditions in
the market(s) or industry;
• significant factors that may have an
impact on competitive position.
The analysis of competitive conditions may
cover matters such as major strengths and
weaknesses, pricing policy, product lines,
promotional policy and methods, market
share, expansion plans and the consumer’s
perception of the company in relation to other
companies in the industry.
Survey Results
According to the survey results in Chapter
4 and Appendix B, two-thirds (66%) of
the companies provided such information
in 2004-2005 in the corporate profile,
discussion of products, services and markets
and/or the segment review of operations.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) notes that: “Leading companies described
what differentiates the company from
competitors, and provided information on
market size and penetration by the company.”
Furthermore, the Canadian Securities
Administrators ask for a discussion of the
competitive conditions in a company’s
principal markets and geographic areas
including, if reasonably possible, an
assessment of a company’s competitive
position.4
Corporate Reporting to Stakeholders
Study Group Deliberations
Investors and other stakeholders need
information on a company’s competitive
position in the marketplace to assess
performance and future prospects. In addition
to looking at financial data, a competitive
analysis might require a review of all aspects
of operations that may have an impact
on profit and cost figures and thus affect
performance. The specific activities carried
out and the mix of products made, or of
services rendered, may need to be defined.
The analysis might cover the types and
sources of raw materials, number and quality
of the personnel, kind of equipment used and
its age, corporate structure and management
practices, marketing policies and distribution
channels, and so on. Because innovation,
technology, research and development
and quality are now playing major roles in
boosting competitiveness, investors may well
be paying special attention to these aspects
of operations.
Furthermore, a company’s viability and
profitability may well depend on its
strengths, weaknesses and market share,
so that it can formulate a strategy for
success. Indeed, an income statement that
is not linked to competitive conditions can
offer only a one-dimensional picture for
forecasting future prospects.
Study Group Proposal
In the Study Group’s view, it is important
to inform stakeholders about competitive
conditions, disclosing significant factors
that may have an impact on competitive
position and relative market or industry
share for major products and services.
Chapter 7 / Review of Operations — Part C
Illustrative Examples
C4-Catalyst Paper Corporation, 2005 Annual
Report (comment)
C4-Aspreva Pharmaceuticals Corporation,
2005 Annual Report (explanation)
C4-Potash Corporation of Saskatchewan Inc.,
2005 Annual Report (analysis)
C5 — RESPONSE TO CHANGE
Definition
This type of information supplements the
analysis of competitive conditions (see C4)
by providing a general description of how a
company has responded or plans to respond
to changes in the operating environment and
external factors.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, very few (12%)
of the companies provided such information
in 2004-2005. Where available, it was located
in the president/CEO letter or the segment
review.
According to the website survey results
presented in Chapter 12 and Appendix
D, none of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The current literature suggests that all
companies strive for survival and success.
Success generally depends on an appropriate
long-term strategy, but survival requires the
ability to resolve short-term difficulties. The
Canadian Securities Administrators have
recognized the importance of disclosures in
this area, requiring them in NI 51-102F1. 5
Study Group Deliberations
Investors and other stakeholders are primarily
interested in viability and profitability. On
both fronts, they are interested in estimating
a company’s ability to adapt its operations to
the ongoing changes in economic conditions.
Information on adaptive ability may help them
make such assessments.
Adaptive ability varies considerably from one
company to another and across different
industries. Disclosure of information in this
area may provide insight on economic
prospects, types and degrees of risk, capital
investment requirements and expected
profitability. It can be valuable for assessing
future prospects, risk and uncertainty and
management quality. It may also facilitate
comparisons with other entities in the industry
and valuation of debt or equity holdings.
Knowing about a company’s adaptive ability
may also enhance user perspectives on other
information disclosures. For example, it could
provide a direct response to stock market
pressures for information on a change in
strategy or reaction to a threat of a takeover
bid, assist in establishing the amount, timing
and uncertainty of cash flows and provide a
sound basis for evaluating performance.
Study Group Proposal
In the Study Group’s view, it is essential
that companies inform investors and other
stakeholders about their response to
change, describing how they have dealt
with changes in the operating environment
and external factors over the current and
previous years.
Illustrative Examples
C5-Cascades Inc., 2005 Annual Report
(comment)
C5-SNC-Lavalin Group Inc., 2005 Annual
Report (explanation)
C5-TimberWest Forest Corp., 2005 Annual
Report (analysis)
C6 — FORWARD-LOOKING
INFORMATION
Definition
Forward-looking information supplements
the general outlook (see A11) by discussing
specific future prospects, such as:
• currently known facts that are likely to
materially affect the future (for example,
future sales contracts, production plans,
the expiration of an important patent
or licence, future capital expenditure
commitments, future financing plans); and
• commentary on management’s
expectations for company performance
together with the underlying assumptions
and sensitivities.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, although nearly
all (99%) of the companies provided forward-
looking information in 2004-2005, it was
often limited to future capital expenditure
commitments. The information was generally
presented in the president/CEO letter or in
the segment review.
According to the website survey results
presented in Chapter 12 and Appendix D, 2%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Corporate Reporting to Stakeholders
Other Sources of Reference
AR TRENDS 2005 (page 14) notes the
importance of providing a roadmap to
the future. It states that: “Knowledge of
your industry, strengths and market trends
provides only half the investment scenario for
your company. Investors need to understand
the strategies and tactics that your company
has developed to translate those trends and
strengths into growth in shareholder value.”
Over the years, research has shown that
both investors and creditors find forecasts
(including disclosures on “earnings guidance”)
of company performance extremely
important. Contemporary thought is that
it will help them make better economic
decisions. The Canadian Securities
Administrators call for forward-looking
information in NI 51-102F1.6
Study Group Deliberations
Many companies provide a general outlook
in the president/CEO letter. To supplement
this general assessment, users want an
indication of the company’s likely future
development and performance. Forward-
looking information is needed to judge where
a company is going and whether it has the
necessary financial and operating resources to
do so. It is appropriate, therefore, to consider
disclosing future prospects.
There are, however, some concerns about
providing this information:
• No matter how soundly based a forecast
may be at the time it is prepared,
unforeseen changes in circumstances may
invalidate the underlying assumptions and
make it misleading.7
• Preparing such information may be
expensive and lead to delays in reporting.
• Forecasts or projections may be
inaccurate.
• Inaccuracies in such data may result in
legal liability lawsuits. 8
Chapter 7 / Review of Operations — Part C
Study Group Proposal
In the Study Group’s view, it is essential
to give investors and other stakeholders
forward-looking information, discussing
currently known facts that are likely to
materially affect future performance (for
example, future prospects, future capital
expenditure commitments and future
financing plans).
Illustrative Examples
C6-TELUS Corporation, Financial Review,
2005 Annual Report (comment)
C6-Inmet Mining Corporation, 2005 Annual
Report (explanation)
C6-Stantec Inc., 2005 Annual Report
(analysis)
C7 — RISKS AND UNCERTAINTIES
Definition
This type of information describes the risks
and uncertainties that might have a major
impact on a company’s financial position
or operating results (see C1 and C2). It
supplements the commentary on the industry
and economy (in A10) by addressing:
• uncertainties about the nature of
operations portrayed in the current
financial statements and that are
reasonably likely to affect future financial
statements;
• uncertainties due to financial statement
measurements and disclosures;
• uninsured risks of future material losses.
Survey Results
According to the survey results in Chapter
4 and Appendix B, nearly all (99%) of the
companies provided information on risks and
uncertainties in 2004-2005, usually in the
president/CEO letter, the general review of
operations and the segment review.
According to the website survey results
presented in Chapter 12 and Appendix
D, none of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006
(page 39) observes that: “Most companies
did a good job of describing their risks and
uncertainties, and provided information on
their mitigating strategies.”
The current literature has shown that
inadequate disclosure of business risks can
prompt investors and other stakeholders
to make inappropriate risk-return trade-
offs when making economic decisions. The
importance of such disclosures is recognized
by the Canadian Securities Administrators,
who require it under NI 51-102F1.9
Study Group Deliberations
Every business has its risks and uncertainties.
Some are manageable, others less so.
Management generally attempts to protect
its business in several ways. With foreign
exchange, it will hedge currencies; with
interest rates, it will secure fixed-rate
financing on long-term debt; with product
liability, it will emphasize quality control
and carry product liability insurance. Even
in sales, it may refuse substantial orders
when the credit worthiness of a customer is
questionable.
Uncertainties about the nature of operations
might include:
• risks typical of companies in the same
industry (for example, economic trends
such as downturn or recession);
• risks pertaining to a company’s operations,
products or services, whether voluntarily
adopted as part of a management
strategy or the result of external factors
outside of management’s control (for
example, significant increase in costs or
decreases in revenues, supplier and/or
customer dependency, seasonality and
pending litigation or guarantees).
Uncertainties due to financial statement
measurements and disclosures might include:
• liquidity risk (future cash receipts and
payments);
• credit risk (amounts, concentrations,
collateral);
• off-balance sheet risk;
• financial instruments risk;
• market risk (interest rate risk, foreign
exchange risk, market value fluctuations);
• the risks due to concentration in enterprise
assets, customers or suppliers that would
be considered unusual in that industry
even if they are normal for a particular
enterprise. Such concentrations, even if
they have some upside potential, might
also contribute to downside risk beyond
what a reasonably informed reader of the
financial statements might expect;
• critical accounting estimates, including
describing their significance to the
financial statements, assumptions and
methodology of calculation and any
uncertainties affecting the methodology
or the assumptions described (why the
accounting estimate may change from
period to period and have a material
impact on the financial presentation would
also be discussed, along with a sensitivity
analysis quantifying the impact to the
financial statements due to changes in
assumptions);
• any other key factors susceptible to
change that would have a significant
effect on a company’s financial position,
near-term cash flows or results of
operations.
Corporate Reporting to Stakeholders
Uninsured risks of future material losses might
include:
• the actual or potential effects of risks
(such as those related to: torts; theft of,
damage to, expropriation of, or destruction
of assets; business interruption; errors
or omissions; injuries to employees; or
Acts of God) on a company’s historical or
planned operations, including exposure to
losses from claims, curtailment of research
and development or manufacturing, or
contraction or cessation of other activities,
such as discontinuance of a product line;
• current insurance coverage by major
categories of risk without necessarily
quantifying such coverage or changes in
coverage;
• recent claims experience;
• a description of the risk management
programs.
Some companies, however, object to
disclosing information on risk and uncertainty,
stating that:
• there may be overriding competitive
benefits to maintaining the privacy of such
information;
• management has relatively little
experience in determining and reporting
on such matters;
• different companies have widely varying
degrees of exposure to risk; disclosure of
significant risks may adversely affect a
company’s cost of capital.
Study Group Proposal
In the Study Group’s view, it is essential
to give investors and other stakeholders
information on risks and uncertainties that
could have a major impact on financial
position or operating results.
Chapter 7 / Review of Operations — Part C
Illustrative Examples
C7-Finning International Inc., 2005 Annual
Report (comment)
C7-Petro-Canada, 2005 Annual Report
(explanation)
C7-National Bank of Canada, 2005 Annual
Report (analysis)
C8 — FINANCIAL AND OPERATING
OBJECTIVES
Definition
This type of information complements the
corporate mission in A2 by quantitatively
disclosing the financial and operating
objectives for the ensuing fiscal year by major
industry segment along with the related
strategy for meeting those objectives.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, less than three-
quarters (73%) of the companies provided
such information in 2004-2005. Although it
was sometimes included in the president/CEO
letter, it was most commonly found in the
segment review of operations.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 7% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) notes that: “All companies provided
information on achievements. Few provided
specific information on their goals.” It also
states that: “Winning companies provided
specific information on their achievements
(and disappointments), compared with
previously published specific goals. Specific
future short and long-term goals were also
discussed. While there were more specific
score cards this year, there are more
improvements that can be made in this area.”
Study Group Deliberations
Financial and operating objectives provide
a short-term perspective on the corporate
mission statement. These objectives may be
presented at the company or segmented level
and be general in nature or specific to the
industry.
Objectives and the strategy for meeting
those objectives vary considerably from one
company to another and across different
industries. Financial objectives, such as the
policy on dividends, rate of return and debt
ratio, should be stated explicitly. Investors
want to know what to expect from a
company in exchange for their investment.
They also want to know how much exposure
a company is willing to risk to meet
shareholder expectations. To help investors
judge the amount of risk involved, it is better
for management to disclose their objectives,
and then perhaps not attain them, than to
leave investors and other stakeholders in the
dark about intentions for the coming year.
In this vein, it is also important to disclose
potential threats to achieving goals and
objectives in the current year and to explain
why the previous year’s targets were not
achieved (see C9).
Nonetheless, there are problems in disclosing
financial and operating objectives:
• The objectives may be difficult to
communicate.
• Some companies may not have
established formal objectives.
• Management may be reluctant to
disclose objectives if they are then
held accountable for them, especially if
earnings are unpredictable.
• Missing targets may increase the volatility
in the stock price.
• Disclosure of sensitive information
may place a company at a competitive
disadvantage.
• Other companies in the industry may not
disclose objectives.
Study Group Proposal
In the Study Group’s view, it is essential
to inform investors and other stakeholders
about the company’s financial and
operating objectives for the ensuing
fiscal year.
Illustrative Examples
C8-Warnex Inc., 2005 Annual Report
(comment)
C8-Canadian Natural Resources Limited, 2005
Annual Report (explanation)
C8-Transat A.T. Inc., 2005 Annual Report
(analysis)
C9 — PERFORMANCE COMPARED
TO OBJECTIVES
Definition
This type of information depicts, by major
industry segment, a company’s performance
in relation to the financial and operating
objectives established in the previous fiscal
year (see C8).
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, only about
one-third (37%) of the companies provided
information on performance compared
to objectives in 2004-2005. When it was
provided, the comparison was usually set out
separately.
Corporate Reporting to Stakeholders
According to the website survey results
presented in Chapter 12 and Appendix D,
only 4% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006
(page 39) observes that: “All companies
provided information on achievements. Few
provided specific information on their goals.
…While there were more specific score cards
this year, there are more improvements
that can be made in this area.” It went
on to say: “Winning companies provided
specific information on their achievements
(and disappointments), compared with
previously published specific goals. …
Specific future short and long-term goals
were also discussed. They also reviewed past
performance compared with goals/objectives/
targets, and provided reasons for variances.”
AR TRENDS 2005 (page 12) states that:
“Measuring today’s performance against
yesterday’s objectives, explaining the
significance of each target and discussing
the efforts dedicated to their achievement
can be as important to building investor trust
as actually achieving your goals. Scorecards
can provide investors with a concise, ongoing
comparison of objectives and achievements.”
The Canadian Securities Administrators
recognize the importance of such disclosures,
requiring them in NI 51-102F1.10
Study Group Deliberations
The quality of management cannot be
measured merely in financial terms. Investors
are interested in assessing the performance
of a company not only in absolute numerical
terms but also by comparison to their own
expectations, to past expectations expressed
by management and to the performance
of other companies in the same or other
industries.
Chapter 7 / Review of Operations — Part C
Information on performance in meeting
previously defined objectives permits
investors to appraise management’s ability
to forecast, identify problems that may have
prevented the achievement of projected
performance and to estimate the likely future
trend of financial returns. Furthermore, it
is necessary to evaluate the achievement
of management’s previous forecasts to
assess the creditability of the company’s
future financial and operating objectives.
Understanding the likelihood of achieving
future objectives is crucial for investors and
other stakeholders.
Reporting performance against objectives can
be difficult, however, because:
• Performance may be difficult to
communicate.
• Some companies may not identify key
drivers (such as non-GAAP measures)
or have established performance
measurement systems.
• Management may not want to be held
accountable for not meeting targets.
• It may place a company at a competitive
disadvantage.
Study Group Proposal
In the Study Group’s view, it is essential to
inform investors and other stakeholders
about the company’s performance
compared to objectives established in the
previous fiscal year.
Illustrative Examples
C9-Transat A.T. Inc., 2005 Annual Report
(comment)
C9-TELUS Corporation, Financial Review,
2005 Annual Report (explanation)
C9-Inmet Mining Corporation, 2005 Annual
Report (analysis)

C10 — RESEARCH AND
DEVELOPMENT
Definition
Information on research and development
(R&D) encompasses:
• a discussion of the R&D activities
underway;
• a description of significant new products
and processes;
• disclosure of the amounts expensed and/
or capitalized on R&D during the fiscal
year.
Survey Results
According to the survey results in Chapter
4 and Appendix B, less than half (43%) of
the companies provided such information
in 2004-2005. Disclosures varied widely by
industry. Most resource companies disclosed
this information whereas most of the financial
services companies did not. It was usually
included in the segment review of operations.
According to the website survey results
presented in Chapter 12 and Appendix D, 23%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
Research has shown that individual investors,
institutional investors and financial analysts
consider information on planned research and
development useful. For certain industries,
such as natural resources, this information
is crucial to informed decision making. The
importance of such disclosures is recognized
by the Canadian Securities Administrators,
who require it under NI 51-102F1.11
Study Group Deliberations
The future prosperity of many companies
depends on the success of their research and
development programs. In many industry
sectors, failure to keep pace with the rate of
innovation of competitors is likely to lead to a
steady, if not sharp, decline. R&D expenditure,
therefore, is of great interest to investors.
Study Group Proposal
In the Study Group’s view, providing
stakeholders with information about
research and development is discretionary.
When a company discloses such
information, it would normally explain
current activities, significant new products
and processes and amounts expensed
and/or capitalized during the fiscal year.
Illustrative Examples
C10-Carmanah Technologies Corporation,
2005 Annual Report (comment)
C10-DALSA Corporation, 2005 Annual Report
(explanation)
C10-Biovail Corporation, 2005 Annual Report
(analysis)
C11 — SIGNIFICANT AGREEMENTS
AND CONTRACTS
Definition
This type of information (normally disclosed
in C1 or C2) discusses major agreements
(whether approved, pending or expiring) and/
or major contracts (for example, operating,
sales, consulting) that could have a significant
impact on the company’s current/future
operations or profitability.
Survey Results
According to the survey results in Chapter
4 and Appendix B, nearly all (95%) of the
companies provided such information in
2004-2005, usually in the president/CEO
letter (as part of the outlook), the general
review of operations or the segment review.
Corporate Reporting to Stakeholders
Other Sources of Reference
Disclosing information on significant
agreements and contracts is reinforced by the
accounting standards on contingencies and
contractual obligations in the CICA Handbook.
The importance of such disclosures is
recognized by the Canadian Securities
Administrators, who require it under NI
51-102F1.12
Study Group Deliberations
Investors and other stakeholders need
to be made aware of key factors that are
susceptible to change or that would have a
significant effect on a company’s financial
position, near-term cash flows or results of
operations. Such information provides a basis
for assessing present and potential risks,
profitability and future prospects. It may also
help in evaluating financial stability, solvency
and liquidity.
In this regard, investors are interested
in knowing the particulars of any major
agreements, contractual obligations or
commitments that are significant for the
current financial position or anticipated future
operations. Significant obligations may include:
• commitments that involve a high degree
of speculative risk, where the taking of
such risks is not inherent in the nature of
the business;
• commitments to make expenditures that
are abnormal in relation to the financial
position or unusual business operations
(for example, substantial capital asset
expenditures);
• commitments to issue shares;
• commitments that will govern the level of
a certain type of revenue or expenditure
for a considerable period into the future.
Chapter 7 / Review of Operations — Part C
Study Group Proposal
In the Study Group’s view, it is important
to give stakeholders information
about significant agreements and
contracts — whether approved, pending
or expiring — that will have an impact on
current or future operations or profitability.
Illustrative Examples
C11-SNC-Lavalin Group Inc., 2005 Annual
Report (comment)
C11-Biovail Corporation, 2005 Annual Report
(explanation)
C11-Angiotech Pharmaceuticals Inc., 2005
Annual Report (analysis)
C12 — INDUSTRY SPECIFIC DATA
Definition
Industry specific information (which
supplements A10 commentary on the industry
and economy) encompasses matters that
are of particular interest or are unique for an
industry classification.
Survey Results
According to the survey results in Chapter 4
and Appendix B, the vast majority (86%) of
the companies provided such information in
2004-2005, most often in the segment review
or following the audited financial statements.
Other Sources of Reference
For certain regulated industries, such as
communications and utilities, the governing
legislation mandates disclosure of such
information. For other industries, particularly
natural resources such as oil and gas
and financial institutions, providing such
information is a regulatory requirement. The
Canadian Securities Administrators require
disclosure of such information under NI
51-102F1.13
Study Group Deliberations
As noted previously, different industries may
have unique rates of profitability, economic
prospects, types and degrees of risk, and
capital investment requirements. To more
readily understand the operating, investing
and financing activities, and to make valid
comparisons with similar entities within an
industry, investors and other stakeholders
may benefit from disclosure of industry
specific data.
Industry specific data includes, for example:
• mining industry — products in various
stages of production, basis of sale,
long-term contracts, exploration results
and costs capitalized, taxation basis,
established reserves, location, size and
nature of interest in significant properties,
price trends in commodity markets;
• oil and gas industry — production volumes,
wells drilled and success rates, significant
oil and gas properties, facilities and
infrastructure, location of important
producing wells, proved and probable
reserves, undeveloped land, royalty rates,
exploration and development expenditure;
price trends in commodity markets;
• agricultural industries — production and
sales quotas, price trends in commodity
markets, livestock statistics, location of
properties and basis of valuation, seasonal
conditions;
• retail and wholesale trade
industry — turnover, the number, size
and location of outlets, stores under
construction or proposed;
• construction and development
industry — projects underway or planned,
backlog, leasebacks and forward
contracts;
• transportation industry — areas served
and type of service, equipment details
(including owner-driver arrangements),
load factors and appropriate performance
indicators, equipment financing and
depreciation details, fuel costs;
• financial services industry — major
sources of profits, non-banking activities
and contribution to profit and assets,
non-performing loans, restructured loans,
foreign loans and allowance for credit
losses;
• communications industry — details of
publication or media interests, including
circulation or rating figures, revenues from
sales and advertising by publication.
Study Group Proposal
In the Study Group’s view, it is important
to provide stakeholders with industry-
specific data on matters of particular
interest for the industry classification.
Illustrative Examples
C12-Legacy Hotels Real Estate Investment
Trust, 2005 Annual Report (comment)
C12-Baytex Energy Trust, 2005 Annual Report
(explanation)
C12-Toronto Dominion Bank, 2005 Annual
Report (analysis)
Corporate Reporting to Stakeholders
CONCLUSION
The third major category of information in
the Framework for Corporate Reporting is
the Review of Operations. It discusses what
the company has done and plans to do and
whether it has the necessary financial and
other resources to achieve its goals. The
Study Group concluded that companies
should consider providing information on:
overall review and interpretation, segment
review of operations, production information,
competitive conditions and response to
change. In addition, they should consider
Chapter 7 / Review of Operations — Part C
providing: forward-looking information, risks
and uncertainties, financial and operating
objectives, performance compared to
objectives, research and development,
significant agreements and contracts, and
industry specific data.
Appendix C offers guidance for
communicating such information. It poses a
series of questions that merit consideration
if corporate reporting is to meet, more
effectively, the information needs of investors
and other stakeholders.
Notes:
1. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2 and
1.4).
2. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2 (a)
and 1.4 (a)).
3. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.4 (e)).
4. The Canadian Securities Administrators, under
NI 51-102F2 Annual Information Form (Section
5.1(d)) and NI 51-102F1 Management’s Discussion
and Analysis (Part 2, Section 1.2 (c)), call for such
disclosures.
5. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2(e)
and 1.4 (j)).
6. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for disclosures (Part 2, Section 1.2 (e) and
1.4 (d, e, g), 1.11). Regarding forward-looking
information (Part 1, Section (g)), companies
are encouraged to provide forward-looking
information if they have a reasonable basis for
making the statements. Preparing an MD&A
necessarily involves some degree of prediction
or projection. For example, MD&A requires a
discussion of known trends or uncertainties
that are reasonably likely to affect a company’s
business. However, MD&A does not require
that the company provide a detailed forecast
of future revenues, income or loss or other
information. All forward-looking information
must contain a statement that the information
is forward-looking, a description of the factors
that may cause actual results to differ materially
from the forward-looking information, the
material assumptions and appropriate risk
disclosure and cautionary language. Companies
must discuss any forward-looking information
disclosed in MD&A for a prior period which, in
light of intervening events and absent further
explanation, may be misleading. Forward looking
statements may be considered misleading when
they are unreasonably optimistic or aggressive,
or lack objectivity, or are not adequately
explained. Timely disclosure obligations might
also require the issuance of a news release and
filing of a material change report.
7. In June 2006, the Ontario Securities Commission
(OSC) published for comment proposed OSC
Policy 51-604, “Defence for Misrepresentations
in Forward-Looking Information.” The proposed
Policy relates to the defence available
under the Securities Act in an action for
damages for misrepresentations in forward-
looking information contained in an issuer’s
disclosure. The purpose of the proposed
Policy is to outline the OSC views on some
of the policy considerations underlying the
defence for misrepresentations in forward-
looking information and explain how the
OSC approaches the interpretation of certain
aspects of the defence (http://www.osc.gov.
on.ca/Regulation/Rulemaking/Current/Part5/
pol_20060602_51-604_misrepresentations.jsp).
8. For example, under the Ontario Securities
Act, Section 23.1 (formerly known as Bill 198),
publicly traded companies can be held liable
for “any written communication, including a
communication prepared and transmitted only
in electronic form.” The Act further clarifies
its definition of “documents” as: “any other
communication the content of which would
reasonably be expected to affect the market
price or value of a security of the responsible
issuer.” This legislation affects not only
companies located in Ontario but all companies
that have a “real and substantial connection” to
Ontario.
9. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.4 (g)
and 1.14).
10. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.4 (i)).
11. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.7 (ii)).
12. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2 (e)
and 1.4 (g), 1.6, 1.7, 1.8, 1.9, 1.11, 1.14).
13. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.4 (e)).
Corporate Reporting to Stakeholders
 Chapter 8

Financial Summary
and Analysis — Part D
The fourth major category INTRODUCTION
of information in the Exhibit 8.1 lists the types of information allocated to this
Framework for Corporate category. It shows that the financial summary and analysis
Reporting is the Financial may comprise: an analysis of operating results, segment
Summary and Analysis. analysis, analysis of financial position, capital investments
It explains where the and expenditures, analysis of cash flows, liquidity, quarterly
company is now. financial information and accounting policy changes not yet
implemented. It may also include a statement of management’s
responsibility, financial statements/auditor’s report, historical
summary, performance measures and share data.

Exhibit 8.1

FINANCIAL SUMMARY AND ANALYSIS

D1 — Analysis of Operating Results

D2 — Segment Analysis
D3 — Analysis of Financial Position
D4 — Capital Investments and Expenditures
D5 — Analysis of Cash Flows
D6 — Liquidity
D7 — Quarterly Financial Information
D8 — Accounting Policy Changes Not Yet Implemented
D9 — Statement of Management’s Responsibility
D10 — Financial Statements/Auditor’s Report
D11 — Historical Summary
D12 — Performance Measures
D13 — Share Data

This chapter defines each type of information and surveys

current practice. It considers various reference sources,
as well as authoritative pronouncements and regulatory
requirements, if any. The Study Group’s deliberations and
proposals on the relative importance to investors and
other stakeholders follows, along with illustrative examples
of the different levels of disclosure discussed in Chapter
4 — comment, explanation and analysis.

Corporate Reporting to Stakeholders


D1 — ANALYSIS OF OPERATING
RESULTS
Definition
This information offers a comparative
discussion and analysis of operating results
for the past two fiscal years. It would
normally include descriptions and amounts of
unusual or infrequent events or transactions,
or any economic changes that have had (or
could have) a significant impact on continuing
operations.
The analysis would explain why changes have
occurred, or expected changes have not
occurred, in the results of operations. Industry
and economic factors affecting performance
would be discussed. In addition, the impact
on continuing operations of any acquisition,
disposition, write-off, abandonment or other
similar transaction would be considered, as
well as the effect of discontinued operations
on current operations.
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, all of
the companies disclosed this information in
2004-2005. Some companies incorporated
it into the overall review of operations or
the segment review, but most provided it in
a separate section just before the financial
statements.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 4% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) observes that: “The MD&A has become
the prime financial information document
with the financial statements following in
Chapter 8 / Financial Summary and Analysis — Part D
support. This year, almost 100% of companies
positioned the MD&A ahead of the financial
statements.”
Research has shown that investors and other
stakeholders value management’s discussion
of the current year’s operations and that the
Canadian Securities Administrators recognize
the importance of such disclosures by
requiring them under NI 51-102F1.1
Study Group Deliberations
The financial statements are essential to
investor and other stakeholder decision
making. There are practical constraints,
however, on the amount of information that
those statements can effectively convey.
Furthermore, important transactions, events
and conditions are not always fully reflected
in the financial statements, and some are
not easily expressed in dollar amounts.
Therefore, management’s analysis is crucial
to interpreting increasingly complex financial
statements and helping readers understand
operating results during a time of changing
accounting regulations.
Such an analysis allows management the
opportunity to explain, in narrative form, its
current operating results in comparison with
the prior year, any unusual or infrequent
events or transactions, or any significant
economic changes that have had (or could
have) a significant impact on continuing
operations. Clearly, positioning this
commentary beside the earnings statement
would help readers put the numbers in
perspective.
Study Group Proposal
In the Study Group’s view, it is essential
to give investors and other stakeholders
a comparative discussion and analysis
of operating results with a focus on any
changes in revenues and expenses over
the past two fiscal years.
Illustrative Examples
D1-National Bank of Canada, 2005 Annual
Report (comment)
D1-Clearwater Seafoods Income Fund, 2005
Annual Report (explanation)
D1-CGI Group Inc., 2005 Annual Report
(analysis)
D2 — SEGMENT ANALYSIS
Definition
This quantitative analysis, by industry
segment and/or geographic area,
supplements the qualitative discussion
under the segment review of operations
(see C2) and the required disclosures in
the notes to financial statements. It would
normally present key statistics such as gross
revenues, significant capital and operating
expenditures, operating income, return on
shareholders’ equity and capital employed,
and total assets.
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, most
(90%) of the companies provided segment
analysis information in 2004-2005, generally
in the segment review of operations or in a
separate financial review section immediately
preceding the audited financial statements.
According to the website survey results
presented in Chapter 12 and Appendix
D, none of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
Research has shown that security analysts
and portfolio managers want their financial
information disaggregated. In particular,
they use segment data to measure trends
and assess risks. The Canadian Securities
Administrators require disclosure of segment
information under NI 51-102F1. 2
Study Group Deliberations
Financial statements provide information
about conditions, trends and ratios that
assists in predicting cash flows and
assessing earnings and financial position.
These assessments may be complicated
when a company’s activities branch out into
different industries and geographic areas
with different rates of profitability, types
and degrees of risk, capital investment
requirements and economic prospects.
Investors and other stakeholders have
indicated that disaggregation of a
company’s total financial statement data,
providing information about its industry
and geographic segments, is an important
supplement to the aggregated data. Segment
reporting is necessary not only for a proper
understanding of a diversified company, but
also for comparison with other companies
in the same industry, with industry data
and with economic data. Presenting such
information provides a backdrop for
management’s analytical discussion and
analysis.
Study Group Proposal
In the Study Group’s view, it is
essential to provide investors and other
stakeholders with a segment analysis
covering key statistics, such as gross
revenues, significant capital and
operating expenditures, operating
income, return on shareholders’ equity
and capital and total assets.
Corporate Reporting to Stakeholders
Illustrative Examples
D2-Transat A.T. Inc., 2005 Annual Report
(comment)
D2-Finning International Inc., 2005 Annual
Report (explanation)
D2-Inmet Mining Corporation, 2005 Annual
Report (analysis)
D3 — ANALYSIS OF FINANCIAL
POSITION
Definition
This information encompasses a comparative
discussion and analysis of financial position
with a focus on changes in the assets and
liabilities for the past two fiscal years (see C1).
It would normally include descriptions and
amounts of unusual or infrequent events or
transactions, or economic changes that have
had (or could have) a significant impact on
continuing operations.
The analysis would explain why changes
have occurred, or expected changes have
not occurred, in a company’s financial
condition. Liquidity and capital resources
(see D6) would also be discussed, as well
as any restrictions on the flow of funds
from one part of the company’s business to
another. Any off-balance sheet arrangements
affecting the results of financial condition,
liquidity and capital resources would also be
discussed in detail.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, the vast
majority of companies (95%) disclosed this
information in 2004-2005. Although some
companies incorporated it into the overall
review of operations or the segment review,
most provided this analysis in a separate
Chapter 8 / Financial Summary and Analysis — Part D
section immediately preceding the financial
statements.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 2% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) observes that: “The MD&A has become
the prime financial information document
with the financial statements following in
support. This year, almost 100% of companies
positioned the MD&A ahead of the financial
statements.”
Research has shown that investors and other
stakeholders value management’s discussion
of changes that have occurred in corporate
assets and liabilities. The Canadian Securities
Administrators recognize the importance of
such disclosures under NI 51-102F1.3
Study Group Deliberations
The balance sheet is a snapshot of a
company’s financial position at the end
of a financial year. Despite the increasing
complexity and frequency of changes in
accounting standards, there are practical
constraints on how much information
can be effectively conveyed in a balance
sheet. Certain transactions, events and
conditions may not be fully reflected in
the statement (for example, off-balance
sheet financing); others may not be easily
expressed in dollar amounts. Therefore, to
adequately understand and assess investing
and financing activities, users need further
interpretation and analysis. Placing this
commentary beside the balance sheet would
help readers put the numbers in perspective.
 Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with a comparative discussion and
analysis of financial position with a focus
on changes in assets and liabilities for
the past two fiscal years, explaining why
changes have occurred, or expected
changes have not occurred, in their
financial condition.
Illustrative Examples
D3-Catalyst Paper Corporation, 2005 Annual
Report (comment)
D3-SNC-Lavalin Group Inc., 2005 Annual
Report (explanation)
D3-Brookfield Asset Management Inc., 2005
Annual Report (analysis)
D4 — CAPITAL INVESTMENTS AND
EXPENDITURES
Definition
This information discusses, quantifies and
assesses capital expenditures on a timely
basis. Capital expenditures cover fixed asset
purchases, business acquisitions, increases
in investment holdings and other business
development initiatives. Relevant disclosures
would include:
• actual capital expenditures for the period,
why they deviated from those planned,
and related source of financing;
• the nature and purpose of planned capital
expenditures and related sources of
financing;
• expenditures that are necessary, but not
yet committed, to maintain a company’s
capacity for planned growth or to fund
development activities;
• expected effect on liquidity and cash flow
(see D6);
• anticipated future impact on operations
(see C1).
Disclosures about capital investments and
expenditures might also include:
• a description of main projects, including
their cost, estimated additions to
capacity and estimated direct effect on
employment;
• a discussion of announced mergers,
acquisitions and divestitures, including
their cost and estimated direct effect on
employment;
• the nature of a company’s involvement,
if any, with federal, provincial or local
government (for example, capital grants,
loan guarantees).
Survey Results
According to the survey results in Chapter
4 and Appendix B, nearly all (97%) of the
companies provided some information on
capital investments and expenditures in
2004-2005. This information was most
commonly found in the overall review of
operations, in the segment review or in the
financial review immediately preceding the
audited financial statements.
Other Sources of Reference
Several studies have commented on the
importance of capital expenditure information.
One reason for not providing such
information is the potential adverse financial
consequences that may flow from disclosing
sensitive information to competitors.
Nevertheless, CICA Handbook-Accounting
recommendations require the disclosure of
this information, for example, in the statement
of cash flows, as do the Canadian Securities
Administrators under NI 51-102F1.4
Study Group Deliberations
Different industries have different capital
investment requirements. Indeed, some
industries (for example, utilities, transportation
Corporate Reporting to Stakeholders
and communications and natural resources)
are capital intensive and growth is a function
of the amount of capital invested prudently.
To assess continued viability and profitability,
management stewardship and future
prospects, investors and other stakeholders
need information about planned and actual
capital expenditures, the related sources of
financing and the anticipated future impact on
operations (for example, liquidity, cash flow).
Study Group Proposal
In the Study Group’s view, it is important
to provide stakeholders with a review
of capital investments and expenditures
covering fixed asset purchases, business
acquisitions, increases in investment
holdings and/or other business
development initiatives.
Illustrative Examples
D4-Compton Petroleum Corporation, 2005
Annual Report (comment)
D4-AltaGas Income Trust, 2005 Annual
Report (explanation)
D4-CAE Inc., 2005 Annual Report (analysis)
D5 — ANALYSIS OF CASH FLOWS
Definition
This information encompasses a comparative
discussion and analysis of cash flows for
the past two fiscal years. It would normally
include descriptions and amounts of any
unusual or infrequent events or transactions,
or any economic changes that have had (or
could have) a significant effect on continuing
operations.
Chapter 8 / Financial Summary and Analysis — Part D
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, more
than three-quarters (78%) of the companies
disclosed this information in 2004-2005.
Some companies incorporated it into the
overall review of operations or the segment
review, but most provided it in a separate
section immediately preceding the financial
statements.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 1% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006
(page 39) observes that: “The MD&A has
become the prime financial information
document with the financial statements
following in support. This year, almost 100%
of companies positioned the MD&A ahead
of the financial statements.” In this regard,
research has shown that investors and other
stakeholders value management’s discussion
of any changes in assets and liabilities. The
Canadian Securities Administrators require
such disclosures under NI 51-102F1.5
Study Group Deliberations
The cash flow statement provides a great deal
of information and answers certain questions
that the other statements do not. Specifically,
it shows how operations were funded — where
the money came from and where it went — and
the effects on cash (and cash equivalents) of a
company’s operating, investing and financing
activities for the year. Investors and other
stakeholders can benefit from management’s
analysis to assess a company’s ability to
generate positive future cash flows, discharge
its liabilities and pay dividends.
 Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with a comparative discussion and
analysis of cash flows for the past two
fiscal years, including descriptions and
amounts of unusual or infrequent events
or transactions, or any economic changes
that have had (or could have) a significant
effect on continuing operations.
Illustrative Examples
D5-Transat A.T. Inc., 2005 Annual Report
(comment)
D5-Barrick Gold Corporation, 2005 Annual
Report (explanation)
D5-SNC-Lavalin Group Inc., 2005 Annual
Report (analysis)
D6 — LIQUIDITY
Definition
Liquidity refers to a company’s ability to
generate sufficient amounts of cash or cash
equivalents to fund planned growth and
development (also see D5, analysis of cash
flows). A discussion of liquidity would include
working capital requirements, sources of
funding and anything that could affect those
sources. If a company has, or expects to have,
a working capital deficiency, it would also
disclose its ability to meet obligations as they
become due and how it expects to resolve the
deficiency. Any restrictions on the ability to
transfer funds within the company would also
be disclosed.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, nearly all (99%)
of the companies provided at least some of
this information in 2004-2005, usually in the
financial review section preceding the audited
financial statements.
According to the website survey results
presented in Chapter 12 and Appendix D,
only 9% of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
Research has shown that investors and
other stakeholders need information on
liquidity. Some would argue, however, that
potential adverse financial consequences may
flow from disclosing sensitive information
to investors, creditors, regulators and
competitors. Nevertheless, the Canadian
Securities Administrators require this
disclosure under NI 51-102F1.6
Study Group Deliberations
Users — especially creditors — are interested
in liquidity information because their overall
concern is whether a company can repay its
debts and meet its obligations over both the
long and short term. This means comparing
the capital a company has available with its
obligation to repay debts.
To assess the ongoing viability of a company’s
operations, the following information is
needed:
• capital structure and changes in
shareholders’ equity;
• available credit facilities (for example, lines
of credit);
• changes in cash position (working capital/
cash available/cash requirements);
• capital and financing arrangements
(current and proposed);
• the impact of anticipated repayments/
redemptions of debt/equity on liquidity/
financial condition;
• major problems/constraints regarding
liquidity/financing (for example,
regulatory, defaults);
Corporate Reporting to Stakeholders
• trends/mix of financial instruments (both
on and off-balance-sheet) and their use in
hedging various types of business risk (for
example, credit, interest rate, exchange
rate and commodity price).
Study Group Proposal
In the Study Group’s view, it is essential
for companies to give investors and other
stakeholders information about liquidity,
including working capital requirements,
sources of funding and the circumstances
that could affect those sources, their
ability to meet obligations as they become
due and how they expect to resolve any
deficiencies and any restrictions on the
ability to transfer funds within them.
Illustrative Examples
D6-Solana Resources Limited, 2005 Annual
Report (comment)
D6-Precision Drilling Corporation, 2005
Annual Report (explanation)
D6-Saputo Inc., 2005 Annual Report (analysis)
D7 — QUARTERLY FINANCIAL
INFORMATION
Definition
Quarterly financial information (on a segment
basis where appropriate) would encompass:
• total revenue or net sales;
• net income in total and on a per-share and
diluted per share basis and earnings-per-
share;
• net income before discontinued operations
and extraordinary items, in total and on a
per-share and diluted per share basis;
• nonrecurring or exceptional income/
expense items (for example, disposal of a
business segment);
Chapter 8 / Financial Summary and Analysis — Part D
• identification of significant interim
accounting principles that vary from those
used at year end (or, alternatively, any
restatement of quarterly reports to the
year-end accounting basis);
• a reconciliation of amounts previously
reported, along with an explanation of any
differences (for example, the nature and
aggregate effect of any adjustments that
are material to any quarter);
• a brief management commentary on
quarterly operating results and major
developments.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, nearly all
(99%) of the companies provided unaudited
quarterly information in 2004-2005. Although
this information was sometimes included in
notes to financial statements (and identified
as unaudited), it usually was found in a
separate schedule immediately after the
audited financial statements or as part of the
historical summary.
According to the website survey results
presented in Chapter 12 and Appendix D, 45%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
Research has shown that investors and
other stakeholders find quarterly financial
information useful for decision making. At
a minimum, Canadian public companies are
legally required to issue quarterly interim
reports on a fiscal year-to-date basis within
45 days of the end of the first three quarters.
The Canadian Securities Administrators require
such disclosures under NI 51-102F1.7
Study Group Deliberations
Interim financial reporting provides a
continuous source of financial information
that can influence both investment and credit
decisions. Investors, creditors, governments
and society in general will be more effective
in allocating scarce resources among
competing uses if relevant information is
available for evaluating alternative courses of
action and the expected returns, costs and
risks. Management commentary on quarterly
operating results and major developments
provides continuity between the results
reported in quarterly reports and the results
for the full fiscal year.
Although many companies issue quarterly
reports, there is no legal requirement to issue
separate fourth quarter reports. Consequently,
the annual results need to be linked with the
reported results for the first three quarters so
that users can understand what happened in
the fourth quarter.
Study Group Proposal
In the Study Group’s view, it is important
that companies provide stakeholders
with quarterly financial information, such
as total revenue or net sales, net income
in total and on a per-share and diluted-
per-share basis, earnings-per-share, net
income before discontinued operations
and extraordinary items, in total and on
a per-share and diluted-per-share basis,
nonrecurring or exceptional income/
expense items, a reconciliation of amounts
previously reported along with an
explanation for any differences, and a brief
commentary on fourth quarter operating
results and major developments.
Illustrative Examples
D7-Catalyst Paper Corporation, 2005 Annual
Report (comment)
D7-Biovail Corporation, 2005 Annual Report
(explanation)
D7-PROGRESS ENERGY TRUST, 2005 Annual
Report (analysis)
D8 — ACCOUNTING POLICY
CHANGES NOT YET IMPLEMENTED
Definition
This information covers any significant
changes in accounting policies and their
estimated impact on future operating results.
It may also encompass a reconciliation of any
important differences between Canadian and
US GAAP or international financial reporting
standards (IFRS).
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, nearly
all (99%) of the companies provided such
information in 2004-2005, generally in the
financial analysis section of the annual report
immediately preceding the audited financial
statements.
According to the website survey results
presented in Chapter 12 and Appendix
D, none of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
Research has shown that the usefulness of
financial statements is enhanced by disclosure
of a company’s significant accounting policies
(usually in a separate summary cross-
referenced to the financial statements or in
notes to financial statements). In addition
to being advised of the current accounting
policies, investors and other stakeholders also
need to know about any changes in those
policies and their estimated impact on future
operating results. The Canadian Securities
Administrators require such disclosures under
NI 51-102F1.8
Study Group Deliberations
Information on accounting policies and
estimates is fundamental to understanding,
Corporate Reporting to Stakeholders
assessing and interpreting a company’s
activities. So is information on accounting
changes and their impact on operating
results for the current and future years. For
multinational companies in particular, this
may require a reconciliation of any important
differences between Canadian and US GAAP
or Canadian GAAP and international financial
reporting standards (IFRS) so that users can
understand the impact of those differences on
the reported financial results.
Study Group Proposal
In the Study Group’s view, it is essential
to give investors and other stakeholders
information about accounting policy
changes not yet implemented and their
estimated impact on future operating
results including, where applicable, a
reconciliation of any important differences
between Canadian and US GAAP or
international financial reporting standards
(IFRS).
Illustrative Examples
D8-Cascades Inc., 2005 Annual Report
(comment)
D8-George Weston Limited, 2005 Annual
Report (explanation)
D8-Domtar Inc., 2005 Annual Report
(analysis)
D9 — STATEMENT OF
MANAGEMENT’S RESPONSIBILITY
Definition
In addition to management’s responsibility for
the preparation of the financial statements
(see D10), this information may discuss:
• estimates and judgments required (see D8);
• internal control;
• the external auditor’s responsibility and role;
Chapter 8 / Financial Summary and Analysis — Part D
• the role and duties of the audit committee;
• the company’s code of ethics.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, nearly all (99%)
of the companies provided such information
in 2004-2005, usually immediately preceding
the financial statements, often on the same
page as the auditor’s report.
According to the website survey results
presented in Chapter 12 and Appendix
D, none of the companies provided such
information on their investor relations
webpage or elsewhere.
Other Sources of Reference
CICA Handbook Accounting Guideline No. 7,
“The Management Report” states (paragraph
3):
The Accounting Standards Board is of
the opinion that, when an entity’s annual
financial statements are distributed widely, a
management report should be presented. An
entity’s financial statements are considered to
be distributed widely when, for example, its
securities are traded in a public market, it is
required to file financial statements annually
with a securities commission, or its financial
statements are distributed to members or
policyholders in the case of an entity such as a
credit union or a life insurance enterprise.
The Accounting Guideline indicates that the
report should cover the following:
• Financial statements — the preparation and
presentation of the financial statements,
including responsibility for significant
accounting judgments and estimates.
• Specialists’ reports — in certain
circumstances, an annual report containing
financial statements and other financial
information includes a report signed by
 someone with specialized expertise in a
particular field. To clarify the respective
responsibilities of management and a
specialist, the management report should
describe the role and responsibilities of any
specialist whose report is included in the
annual report.
• Other financial information — the
preparation and presentation of
other financial information and its
consistency with the financial statements.
Inconsistencies between the financial
statements and other financial information
that accompanies them undermine the
credibility of the financial information
presented.
• Internal control over the financial reporting
process — the development of internal
controls over the financial reporting
process designed to provide reasonable
assurance that relevant and reliable
financial information is produced.
The Guideline points out that the
management report should be presented
separately from, but adjacent to, the financial
statements. In addition, it should be signed
by one or more senior officers. It should also
be dated to show which events are covered.
Normally, the date would be the same as the
date of the auditor’s report.
Study Group Deliberations
It is imperative that investors and other
stakeholders clearly understand the roles
and responsibilities of those involved with
preparing financial information. Management’s
statement of responsibility clarifies that
management has prepared the financial
statements in accordance with generally
accepted accounting principles and is
responsible for all information disclosed in the
annual report. In addition, other information
in the management report might include
a reference to estimates and judgments
required, representations on internal control
processes, including internal control over
financial reporting, responsibility for disclosure
controls and procedures, explanation of the
auditor’s responsibility and role, explanation of
the role and duties of the audit committee and
reference to a company’s code of ethics.
Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with a statement of management’s
responsibility for the financial statements
and for other information in the corporate
report, making reference to estimates and
judgments, internal control, the auditor’s
and the audit committee’s responsibilities
and roles and corporate ethics.
Illustrative Examples
D9-ZENON Environmental Inc, 2005 Annual
Report (comment)
D9-TELUS Corporation, Financial Review,
2005 Annual Report (explanation)
D9-Freehold Royalty Trust, 2005 Annual
Report (analysis)
D10 — FINANCIAL STATEMENTS /
AUDITOR’S REPORT
Definition
This information includes the following:
• financial statements;
• auditor’s report;
• notes and supporting schedules to
which the financial statements are cross-
referenced.
Financial statements normally include a
balance sheet, income statement, statement
of retained earnings and cash flow statement.
Comprehensive income and its components
Corporate Reporting to Stakeholders
are also presented in a statement displayed
with the same prominence as the other
statements. Notes to financial statements,
and supporting schedules to which the
financial statements are cross-referenced,
are an integral part of such statements. The
same does not apply to information set out
elsewhere in an annual report, in a prospectus
or in other material attached to or submitted
with financial statements.9
Survey Results
According to the survey results in Chapter
4 and Appendix B, all of the companies
provided financial statements and an auditor’s
report in 2004-2005, generally in the latter
part of the annual report, after the president/
CEO letter, the general review of operations
and the segment review, but preceding the
supplementary information.
According to the website survey results
presented in Chapter 12 and Appendix D, 96%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006
notes (page 39) that: “Financial statement
measurements and disclosures are governed
by statutory requirements, including CICA
accounting standards. Winners added
dimension and attention with smart
formatting and creative use of colour, type
face and captioning.”
Research has shown that, to facilitate user
understanding, interpretation and analysis
of a company’s activities, it is necessary
to present financial statements and note
disclosures. To add credibility to the financial
statements, an auditor’s report is also
necessary. This is evidenced by numerous
studies of user information needs and current
practices in Canada.10 The Canadian Securities
Chapter 8 / Financial Summary and Analysis — Part D
Administrators require the disclosure of the
annual financial statements and the related
auditor’s report under NI 51-102 Continuous
Disclosure Obligations.11
Study Group Deliberations
Addressing the content of financial statements
is outside the scope of this Research Study.
Nonetheless, it is important to acknowledge
that financial statements are a focal point
for other information in corporate reports.
The CICA Handbook-Accounting notes that
“Financial statements form part of the process
of financial reporting that includes also, for
example, information in annual reports outside
the financial statements and in prospectuses
and in funding proposals.” 12
The Handbook also states that “The objective
of financial statements is to communicate
information that is useful to investors,
members, contributors, creditors and other
users in making their resource allocation
decisions and/or assessing management
stewardship.” Consequently, financial
statements provide information about a
company’s:
a) economic resources, obligations and
equity/net assets;
b) changes in economic resources,
obligations and equity/net assets; and
c) economic performance.” 13
Resource allocation decisions involve the
use of financial statements and other
information for predicting a company’s ability
to earn income and to generate cash flows
in the future to meet its obligations and to
generate a return on investment. The harder
it is for users to correlate information with
a company’s ability to earn income and
generate cash flows, the more uncertainty
and the higher the risk of loss.

Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with the financial statements and auditor’s
report.
Illustrative Examples
D10-North West Company Fund, 2005 Annual
Report (comment)
D10-Clearwater Seafoods Income Fund, 2005
Annual Report (explanation)
D10-Cameco Corporation, 2005 Annual
Report (analysis)
D11 — HISTORICAL SUMMARY
Definition
This information covers selected financial data
for at least the last five years:
• net sales or total revenues;
• income before discontinued operations
and extraordinary items, in total and on a
per share and diluted per share basis;
• total assets;
• long-term financial liabilities, including
retractable and redeemable preferred
shares expected to be redeemed;
• shareholders’ equity;
• dividends per share for each class of
shares;
• net earnings;
• earnings-per-share, before and after
extraordinary items, and on a fully diluted
basis.
The historical summary should also include
an explanation of factors that materially
affect the comparability of such information
(for example, accounting changes, business
combinations, disposal of business operations).
Survey Results
According to the survey results in Chapter 4
and Appendix B, more than three-quarters
(80%) of the companies provided a historical
summary in 2004-2005, usually in a table
immediately following the audited financial
statements.
Other Sources of Reference
Research has shown that individual investors,
financial analysts and institutional investors
find the historical summary useful for
decision making. The Canadian Securities
Administrators call for such a summary under
NI 51-102F1.14
Study Group Deliberations
Investors and other stakeholders need a
historical foundation for assessing trends
in profitability and financial condition. A
statistical review of at least the previous five
years (preferably covering the full business
cycle) will help provide a clear picture of a
company’s operating, financing and investing
activities.
Study Group Proposal
In the Study Group’s view, it is important
to give stakeholders a historical summary
of selected financial data, such as net
sales or total revenues, income before
extraordinary items, total assets, long-
term financial liabilities, preferred shares,
shareholders’ equity, dividends, net
earnings and earnings-per-share for at
least the past five years.
Illustrative Examples
D11-Baytex Energy Trust, 2005 Annual Report
(comment)
D11-Agrium Inc., 2005 Annual Report
(explanation)
D11-Catalyst Paper Corporation, 2005 Annual
Report (analysis)
Corporate Reporting to Stakeholders

D12 — PERFORMANCE MEASURES
Definition
Information on performance measures
supplements the financial highlights (A8),
historical summary (D11) and industry specific
data (C12). It would normally encompass
standard GAAP-based financial ratio analysis
on profitability, solvency, liquidity and
productivity measures relevant to the industry
involved. It may also include industry-specific
ratio analysis (commonly called non-GAAP
measures) and other key industry-specific
performance indicators.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, nearly all (98%)
of the companies provided information on
performance measures in 2004-2005, usually
in the financial highlights, the historical
summary and in the financial review section
immediately preceding the audited financial
statements. Some companies provided a
separate section on non-GAAP measures,
along with a reconciliation to GAAP.
According to the website survey results
presented in Chapter 12 and Appendix D, 52%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006
(page 39) observes that: “The award winning
companies provided meaningful ratios and
clear graphics to complement the text and to
present trends.” In this regard, research has
shown that statistical data and ratio analysis
can assist investors and other stakeholders in
making decisions.
Chapter 8 / Financial Summary and Analysis — Part D
Study Group Deliberations
Financial statements are a company’s primary
reporting mechanism. Many interested parties,
including investors and creditors, use them
to evaluate performance and to determine
overall financial well-being. Users’ decisions,
however, cannot be made until the financial
statements have been analyzed, often by rule-
of-thumb measures, review of trends in past
performance, comparison with industry norms
and ratio analysis.
Financial ratios are often used to interpret
and explain financial statements. They can be
an effective tool for evaluating profitability,
solvency and liquidity. When making
investment or credit decisions, users evaluate
a company’s profitability (for example,
profit margin, asset turnover, return on total
assets), solvency (for example, debt/equity
ratio, interest coverage) and liquidity (for
example, current ratio, receivable turnover,
inventory turnover).
In a particular industry, there are probably
fewer than 10 key statistics that indicate how
well a company has performed and what can
be expected. Many of these, such as number
of customers, sales by type, average daily
newspaper circulation, number of employees,
cumulative cash flow, operating income and
order backlog, can be presented in a chart
or table to facilitate user understanding and
analysis. The presentation of statistics such as
sales and new orders also are effective in a
chart. Other statistics, however, such as those
relating to product quality and the status
of important research projects, are best
presented in narrative form.
 Study Group Proposal
In the Study Group’s view, it is essential
that to give investors and other
stakeholders industry-specific performance
measures, such as non-GAAP measures,
along with standard financial ratio analysis
of matters such as profitability, solvency,
liquidity and productivity.
Illustrative Examples
D12-Agrium Inc., 2005 Annual Report
(comment)
D12-Thomson Corporation, 2005 Annual
Report (explanation)
D12-Norbord Inc., 2005 Annual Report
(analysis)
D13 — SHARE DATA
Definition
Share data supplements ownership/control
information (A4), financial highlights (A8), the
historical summary (D11) and management’s
overall review and interpretation (C1).
Outstanding share capital may be presented
in a narrative, supplemented by statistics (see
D12) such as a quarterly and annual share
trading summary (for example, high, low,
close and volume), dividend record and policy
(and any payment restrictions or intent to
change the policy) and valuation day prices
(for convenient reference).
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, all of the
companies provided share data in 2004-2005,
most commonly at the back of the annual
report, after the audited financial statements.
Certain share information was often included
in the financial highlights, the historical
summary and management’s overall review
and interpretation.
According to the website survey results
presented in Chapter 12 and Appendix D, 98%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) observes that: “Winning companies
gave detailed information on items such
as: …IR info including stock performance &
dividend policy…” “Some reports provide clear
reference in the annual report to separate
or additional disclosures in the Management
Information Proxy/Circular. Many do not.”
Research has shown that investors and other
stakeholders find information on market
prices of stocks to be useful. The Canadian
Securities Administrators require its disclosure
under NI 51-102.15
Study Group Deliberations
Share data is of value because it presents
both the actual share prices and their
variability over time. Share prices provide an
indication of whether the market considers
a company’s performance to be satisfactory.
The bid-offer spread of the shares will depend
partially on the volume of shares traded.
Therefore, transaction volume information
may also prove useful to investors and other
stakeholders for assessing the marketability of
a company’s shares.
Narrative information about shares, supported
by statistical data, communicates essential
information in an effective and readily
understandable form for decision making.
It also facilitates assessment of risk and
uncertainty and future prospects, as well as
comparisons with other companies and with
the industry in general.
Corporate Reporting to Stakeholders
 Study Group Proposal
In the Study Group’s view, it is essential to
provide investors and other stakeholders
with share data such as outstanding share
capital, share trading summary, dividend
record and policy.
Illustrative Examples
D13-Gildan Activewear Inc., 2005 Annual
Report (comment)
D13-Enerplus Resources Trust, 2005 Annual
Report (explanation)
D13-Transcontinental Inc., 2005 Annual Report
(analysis)
Chapter 8 / Financial Summary and Analysis — Part D
CONCLUSION
The fourth major category of information
in the Framework for Corporate Reporting
is the Financial Summary and Analysis. It
explains where the company is now. The
Study Group concluded that companies
should consider providing: an analysis of
operating results, segment analysis, analysis
of financial position, capital investments and
expenditures, analysis of cash flows, liquidity,
quarterly financial information and accounting
policy changes not yet implemented. In
addition, they should consider providing: a
statement of management’s responsibility,
financial statements/auditor’s report,
historical summary, performance measures
and share data.
Appendix C offers guidance for
communicating such information. It poses a
series of questions that merit consideration
if corporate reporting is to meet, more
effectively, the information needs of investors
and other stakeholders.
Notes:
1. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2, 1.2
(d), 1.3 (2), 1.4, 1.4 (a, b, c, f) and 1.12).
2. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2 (a),
1.4 (a) and 1.12).
3. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2, 1.2
(e), 1.3 (2), 1.8, 1.12 and 1.14).
4. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.7).
5. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2, 1.2
(d), 1.3 (2) and 1.12).
6. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2 (b,
e), 1.6 and 1.7).
7. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.5 and
1.10).
8. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.13).
9. Refer to CICA Handbook-Accounting Section
1400, General Standards of Financial Statement
Presentation, paragraph 1400.10.
10. For a survey of the contents of the financial
statements/auditor’s report, refer to the
annual CICA publication Financial Reporting
in Canada, which covers the practices of 200
Canadian public companies (http://www.cica.
ca/3/9/2/6/4/index1.shtml).
11. The Canadian Securities Administrators, under NI
51-102 Continuous Disclosure Obligations, Part 4,
Financial Statements, call for comparative annual
financial statements and an accompanying
auditor’s report to be filed by reporting issuers
within 90 days of the end of the most recently
completed financial year.
12. Refer to CICA Handbook-Accounting Section
1000, Financial Statement Concepts, paragraph
1000.06.
13. Refer to CICA Handbook-Accounting Section
1000, Financial Statement Concepts, paragraph
1000.15.
14. The Canadian Securities Administrators, under NI
51-102F1 Management’s Discussion and Analysis,
call for such disclosures (Part 2, Section 1.2 (e)
and 1.3 (1)).
15. The Canadian Securities Administrators, under NI
51-102 Continuous Disclosure Obligations, Part 5,
Management’s Discussion and Analysis, require
the disclosure of outstanding share data. NI
51-102F1 Management’s Discussion and Analysis,
also calls for such disclosures (Part 2, Section
1.15 (b) (ii)).
Corporate Reporting to Stakeholders
 Chapter 9
Supplementary
Information — Part E
The last of the five major
categories of information
in the Framework for
Corporate Reporting is
Supplementary Information.
It covers information
not addressed under
the other four major
categories — corporate
overview, corporate social
responsibilities, review of
operations and financial
summary and analysis.
INTRODUCTION
Exhibit 9.1 shows the types of information allocated to this
category, including a table of contents/navigation, a glossary
of terms, a corporate directory and shareholder and investor
information. This chapter defines each type of information
and surveys current practice. It also reviews other sources
of reference, as well as authoritative pronouncements
and regulatory requirements, if any. The Study Group’s
deliberations and proposals on the relative importance to
investors and other stakeholders follows, along with illustrative
examples of the different levels of disclosure discussed in
Chapter 4 — comment, explanation and analysis.
Exhibit 9.1
SUPPLEMENTARY INFORMATION
E1 — Table of Contents/Navigation
E2 — Glossary of Terms
E3 — Corporate Directory
E4 — Shareholder and Investor Information
Corporate Reporting to Stakeholders

E1 — TABLE OF CONTENTS /
NAVIGATION
Definition
A table of contents or other means of
navigation (for example, on a company
website) sets out the various sections of the
corporate report and the information they
contain, along with the corresponding page
numbers.
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B, nearly
all (98%) of the companies provided a table
of contents in their 2004-2005 annual
reports, generally on the inside cover of the
annual report. Many companies included a
second table of contents for the financial
review section of the report. When a two-
part annual report was issued, a separate
table of contents was provided for each
and they were usually cross-referenced
(summarized corporate reporting is
discussed in Chapter 11).
According to the website survey results
presented in Chapter 12 and Appendix D, 82%
of the companies provided such information on
their investor relations webpage or elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “This year, financial reporting
judges focused on a number of features in
arriving at their evaluations of each annual
report: [including]… a table of contents. Most
did a good job.”
Successful communication is directly related to
the ease with which readers find the required
information. Generally, the more time is
Chapter 9 / Supplementary Information— Part E
needed to find pertinent facts, the less effort
will be devoted to comprehension and positive
decisions. The table of contents should be
brief and exact (especially for lengthy reports),
generally running one page, setting out section
titles and corresponding page numbers.
Study Group Deliberations
Annual reports often contain a wealth of
information, both financial and non-financial,
which varies widely in nature and complexity.
A table of contents is essential to providing
a directory on the various matters covered.
A table of contents will indicate the breadth
of information included in the annual report
(content) and a roadmap for finding specific
items. Although this will not make it easier to
understand the information presented, it will
at least help to identify where the messages
are being conveyed.
Most reports are prepared for people who
are pressed for time. Accordingly, if readers
want additional information on a particular
area of interest, they should be able to
glance at the table of contents, find the
appropriate section and page number and
easily zero in on the desired area.
Study Group Proposal
In the Study Group’s view, it is essential
that companies provide stakeholders with
a table of contents or other means of
navigation in all of their communications
with shareholders and other stakeholders.
Typically, this would appear inside the
front cover of a corporate report or on
the first page of a company website. In
addition, each major section of a published
report should be clearly labeled and all
pages should be numbered.
Illustrative Examples
E1-Abitibi-Consolidated Inc., 2005 Annual
Report (comment)
E1-Potash Corporation of Saskatchewan
Inc, 2005 Annual Report-Financial Review
(explanation)
E1-RIOCAN REAL ESTATE INVESTMENT
TRUST, 2005 Annual Report (analysis)
E2 — GLOSSARY OF TERMS
Definition
A glossary provides definitions of terms,
practices and/or concepts for the specific
nature of operations or the industry in which
a company operates. It complements A3 on
“products, services and markets” as well as
A10 on “commentary on the industry and
economy.”
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, less than
half (46%) of the companies provided such
information in 2004-2005. The most common
location was in the back of the annual report,
but several companies included the definitions
with the review of operations.
According to the website survey results
presented in Chapter 12 and Appendix D, 19%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “Supplementary information
provided disclosures that enhanced the
report. Winning companies gave detailed
information on items such as: …Glossary
of terms. Continued improvement in the
disclosure of supplementary information was
noticed again this year.”
As noted in Chapter 2, research has shown
that problems exist in external accounting
communication. This is largely because
terms used in corporate reports are not
standardized and words in ordinary usage
are assigned specific technical meanings.
Familiarity with key terms might facilitate
the assessment and interpretation of an
organization’s activities.
Study Group Deliberations
One method of increasing the understanding
of both financial and non-financial readers is
to include a glossary of technical accounting
and financial terms used. It is clear that
annual reports should avoid the use of highly
technical terminology. In other words, they
should be written in plain English (form and
presentation matters are discussed in Chapter
10). Nevertheless, a glossary of terms may
help users understand terminology that is
unique to a particular industry without having
to acquire the expertise of an industry analyst.
Study Group Proposal
In the Study Group’s view, providing
a glossary of terms to stakeholders
is discretionary. If it helps to reduce
confusion, it might encompass practices
and/or concepts about the nature of a
company’s operations or the industry in
which it operates.
Illustrative Examples
E2-Cameco Corporation, 2005 Annual Report
(comment)
E2-Barrick Gold Corporation, 2005 Annual
Report (explanation)
E2-Enerplus Resources Trust, 2005 Annual
Report (analysis)
Corporate Reporting to Stakeholders

E3 — CORPORATE DIRECTORY
Definition
This type of information (inter-related with
A5 on “organizational structure”) may
encompass:
• a list of the directors of the organization,
their titles and term of office;
• key board committees on which directors
serve;
• shareholdings, contracts, remuneration
and potential conflict of interest
information;
• a profile of each director, together with
current photographs, indicating present
positions and principal occupations during
the last five years, ages, experience and
other directorships and offices held.
Survey Results
According to the annual report survey
results in Chapter 4 and Appendix B,
virtually all (99%) companies listed their
directors in 2004-2005, and most identified
key board committees on which the
directors serve. Beyond that, there was
little disclosure of shareholdings, contracts,
remuneration and potential conflict of
interest information. Very few companies
presented a profile of each director outlining
principal occupation and experience. Usually,
such information was presented at the very
back of the annual report.
According to the website survey results
presented in Chapter 12 and Appendix D, 32%
of the companies had such information on
their investor relations webpage or elsewhere.
Another 52% provided governance disclosures
elsewhere on their website.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “Supplementary information
provided disclosures that enhanced the
Chapter 9 / Supplementary Information— Part E
report. Winning companies gave detailed
information on items such as: Directors
affiliations, committee appointments,
attendance record, share ownership….
Continued improvement in the disclosure
of supplementary information was noticed
again this year. Some reports provide clear
reference in the annual report to separate
or additional disclosures in the Management
Information Proxy/Circular. Many do not.”
AR TRENDS 2005 (page 18) states that:
“Recent corporate scandals and the passing
of the Sarbanes-Oxley Act of 2002 have
focused the public’s attention on the need
for a strong, independent and active Board
of Directors. The quality of a company’s
Board matters enormously to shareholders,
as this group is responsible for ensuring
management is running the company to
generate maximum sustainable shareholder
value.”
In Canada, the Canadian Securities
Administrators recognize the importance of
such information disclosures by requiring
that certain information be provided to
shareholders in a separate document entitled
“management information circular” and
“proxy statement,” where they would like to
see, for example, the name of each director
(or nominee), principal occupation over
the past five years, period of service as a
director, shares held in the company and the
parent, and appointments to committees of
the Board of Directors (such as the executive
committee and audit committee).1
Study Group Deliberations
To adequately assess the quality of
management, investors and other
stakeholders need to know who is at an
organization’s helm and to have some
knowledge of management’s experience.
Although certain information is required
in proxy statements, those statements are
really prepared for one purpose — the annual
general meeting — and their distribution is
usually limited to the shareholders attending
that meeting. This important information
bears repeating in the annual report.
Study Group Proposal
In the Study Group’s view, it is essential
to give stakeholders a corporate directory
identifying directors and providing a
brief profile of each, as well as key board
committees.
Illustrative Examples
E3-TransAlta Corporation, 2005 Annual
Report (comment)
E3-Inmet Mining Corporation, 2005 Annual
Report (explanation)
E3-Precision Drilling Corporation, 2005
Annual Report (analysis)
E4 — SHAREHOLDER AND
INVESTOR INFORMATION
Definition
Shareholder and investor information may
encompass the following:
• date, time and location of annual general
meeting;
• stock exchanges identification and share
trading symbol;
• transfer agent/registrar/trustees and
respective addresses;
• identification of any shareholder
investment plans;
• identification of investor relations
contacts where additional information
may be obtained about share records and
company activities;
• contacts for copies of the annual report
(for example, French/English) or other
shareholder reports (for example, AIF,
Form 10-K);
• tax implications for security holders
outside of Canada;
• identification of bankers, legal counsel,
auditors;
• address of corporate head office.
Survey Results
According to the annual report survey results
in Chapter 4 and Appendix B, shareholder
and investor information was provided
by virtually all (99%) of the companies in
2004-2005, usually at the back of the annual
report. The extent of such information,
however, varied widely.
According to the website survey results
presented in Chapter 12 and Appendix D, 99%
of the companies provided such information
on their investor relations webpage or
elsewhere.
Other Sources of Reference
The Corporate Reporting Awards 2006 (page
39) states that: “Supplementary information
provided disclosures that enhanced the
report. Winning companies gave detailed
information on items such as: …IR info
including stock performance & dividend
policy…. Continued improvement in the
disclosure of supplementary information
was noticed again this year. Some reports
provide clear reference in the annual report
to separate or additional disclosures in the
Management Information Proxy/Circular.
Many do not.”
In Canada, the Canadian Securities
Administrators recognize the importance
of such disclosures by requiring them in a
separate document such as the “management
information circular” and “proxy statement.”
The Canadian Securities Administrators
want to see, for example, the date, time
and location of the annual general meeting,
Corporate Reporting to Stakeholders
identification of any shareholder investment Illustrative Examples
plans, and information regarding auditors, E4-Cameco Corporation, 2005 Annual Report
transfer agents and registrars. 2 (comment)

Study Group Deliberations E4-Agrium Inc., 2005 Annual Report

The main reason for having this information
in the annual report is to give current and
potential shareholders general information on
when and where they can exercise their voting
rights and register and transfer shareholdings.
More companies are now recognizing the
importance of ongoing shareholder relations
through investor relations departments. This
helps investors, potential investors and other
stakeholders direct their enquiries to those
familiar with a company’s activities who can
respond to user needs for information.
In the end, perhaps investor relations
departments may be viewed as “talking”
annual reports — only they are there to
answer questions from day-to-day on an
interactive basis, not once a year. Most, it
seems, are genuinely useful for clarifying
public factual matters that relate to a
company’s performance, such as a breakdown
of earnings. Some go further, sharing the
company’s view of industry trends and
relative competitiveness.
(explanation)
E4-National Bank of Canada, 2005 Annual
Report (analysis)
CONCLUSION
The last part of the corporate reporting
framework, Supplementary Information, deals
with other matters of interest to investors
and other stakeholders. The Study Group
concluded that companies should consider
providing a table of contents/navigation, a
glossary of terms, a corporate directory and
shareholder and investor information.
Appendix C offers guidance for
communicating such information. It poses a
series of questions that merit consideration
if corporate reporting is to meet, more
effectively, the information needs of
investors and other stakeholders.

Study Group Proposal

In the Study Group’s view, it is desirable to
give stakeholders shareholder and investor
information, such as the date, time and
location of annual general meetings, stock
exchanges and share trading symbol,
transfer agent/registrar/trustees and
respective addresses, any shareholder
investment plans, address of corporate
head office and investor relations contacts.

Chapter 9 / Supplementary Information— Part E

Notes:

1. The Canadian Securities Administrators, under 2. The Canadian Securities Administrators, under
NI 51-102 Continuous Disclosure Obligations, NI 51-102 Continuous Disclosure Obligations,
Part 9, Proxy Solicitation and Information Part 9, Proxy Solicitation and Information
Circulars, call for specific disclosures on the Circulars, call for specific disclosures in Form
election of directors (for example, refer to Item 51-102F5, Information Circular. Such disclosures
7 of Form 51-102F5, Information Circular). Such include, for example:
disclosures include: • executive compensation (Item 8);
• name, province or state, and country of • securities authorized for issuance under
residence, of each director and proposed equity compensation plans (Item 9);
director; • indebtedness of directors and executive
• the period or periods during which each officers (Item 10);
director served as a director and when the • interest of informed persons in material
term of office for each director and proposed transactions (Item 11);
director will expire; • appointment of auditor (Item 12);
• the members of each committee board; • management contracts (Item 13).
• the current principal occupation, business or
employment of each director and proposed
director, including the name and principal
business of any company where such
employment is carried on;
• the number of securities of each class of
voting securities of the company or any of its
subsidiaries beneficially owned, directly or
indirectly, or controlled or directed by each
proposed director;
• if securities carrying 10% or more of the
voting rights attached to all voting securities
of the company or of any of its subsidiaries
are beneficially owned, directly or indirectly,
or controlled or directed by any proposed
director and the proposed director’s
associates or affiliates,
°° the number of securities of each class
of voting securities beneficially owned,
directly or indirectly, or controlled or
directed by the associates or affiliates; and
°° the name of each associate or affiliate
whose security holdings are 10% or more.

Corporate Reporting to Stakeholders

 Chapter 10
Enhancing
Corporate Reporting
“By concentrating on
improving the amount
of content in the annual
report, some companies
are failing to focus on
what they actually need
to communicate, what
investors want to know and
how this information should
be presented. Investors
are human beings who
will remember and absorb
much more information if
the performance story is
told clearly and not buried
in dense and sometimes
jargon-ridden text.” 1
INTRODUCTION
In Chapter 2, the Study Group concluded that the primary
objective of corporate reporting is to communicate, in a
readily understandable way timely, reliable and relevant
information on a company’s past, present and future
activities as a basis for making economic decisions. Effective
communication between a company and its investors and
other stakeholders can reduce unrealistic expectations and
poor resource-allocation decisions.
Chapters 5 to 9 of this Research Study addressed the
information content of corporate communications, with
particular emphasis on annual reports and company
websites. This chapter looks at ways to enhance corporate
communications using corporate reports (Chapter 12 looks at
ways to enhance corporate communications using websites).
It discusses the concept of effective communication, the need
to disclose essential information and areas for improvement.
EFFECTIVE COMMUNICATION
In a publication released in 2007, PricewaterhouseCoopers
said that:
In recent years there has been much tinkering with accounting
and financial reporting standards. But surveys of analysts and
investors across the globe indicate that current models are still too
backward-looking and compliance driven. As a result, the markets
are finding other ways to get the information they need. Investors
are clear that ‘corporate reporting’ is not just about the numbers. 2
Over the past decade, developments in corporate reporting
have been more concerned with financial information than
with form and presentation. According to the current literature
and guidance on how to improve corporate reporting, form
and presentation are crucial in communicating effectively with
investors and other stakeholders. 3
Corporate Reporting to Stakeholders
Throughout its deliberations, the Study
Group held firmly to the view that decisions
on form and presentation of financial and
business information should be based on
management’s judgment. Reports that
rigidly follow published rules and regulatory
requirements usually prove to be repetitive,
cumbersome and unintelligible. In this regard,
the Study Group noted that corporate
communications vary considerably, with
some companies issuing two, three or more
separate documents containing information
that previously was part of the annual report.
The preparation of the annual report requires
a renewed focus and attention. It should not
be undertaken hastily. The document should
have a shelf life of at least one year. To do
this, it must be readable, focus on delivering
the key messages that management needs
to convey and communicate effectively with
investors and other stakeholders.
General Readability
The CICA Corporate Reporting Awards
2007 (CRA) evaluation criteria included the
following:4
• clarity of presentation;
• writing is in plain language: meaningful
and consistent throughout;
• effective use of colour, white space,
captions, headlines, type styles and size;
• effective use of photographs, charts and
graphics to add explanatory power;
• logical progression of report and
continuity of design;
• full disclosure of reliable, relevant
information needed to understand a
particular company.
Clarity and Plain Language
The CRA evaluation criteria focus on what
investors want, starting with clarity and plain
language. The criteria are consistent with
those used in the United States. 5 Each year
since 1991, three independent organizations
Chapter 10 / Enhancing Corporate Reporting
(the National Investor Relations Institute,
DePaul University and the American Institute
of Graphic Arts) evaluate the annual reports
of more than 700 public companies based
on their visual presentation, the clarity
and communicability of their message and
the depth and candor of their financial
reporting.6
The criteria are also consistent with those
used in the United Kingdom. Exhibit 10.1 is
an excerpt from the 2006 publication Report
Leadership, produced by a multi-stakeholder
group that aims to challenge established
thinking on corporate reporting.7 The group
emphasizes that “clear messaging helps guide
the information that readers take from a
report — and shape the conclusions that they
draw from it.”
Exhibit 10.1
EFFECTIVE COMMUNICATION
MESSAGING
The problem
Companies often bury key messages in text or fail to spell
What investors want
Clarity.
them out at all.
As a result, investors and other audiences may have to read
Messages backed-up by evidence.
the whole document before they can work out the main issues. Plain speaking.
Many reports also give out mixed messages. There are key Plain English.
investment points that a company needs to get across – but
other, less crucial themes or transient issues are bolted on
Balanced discussion of performance.
to support an attractive design concept.
Clear messaging helps guide the information that readers
take from a report – and shape the conclusions that they
draw from it.
Some companies still seem to believe that the way to
present their investment case is to show a partial picture,
or huff and puff. We disagree. If management talk to people
as equals, mention the downs as well as the ups, and explain
why they believe in the business – investors are more likely to
get the message.
Design and Presentation
Corporate Reporting Awards 2007 states
that:8
• The cover [of the annual report] should
deliver a message and many companies
do this very effectively.
Reporting should focus on
the key points, so that readers
can’t miss them.
08
• Winning companies make great use of
colour, type face, white space, style and
size.
• Excellent use of graphics, particularly in
the MD&A, is also featured by winning
companies.
A good annual report begins by making an
impression with the cover. In this regard,
AR Trends 2007 explores how companies
use traditional annual reports to inform and
engage investors as effectively as possible.9
Exhibit 10.2 (from page 6) notes that “most
Canadian and US companies continue to use
cover themes to capture the reader’s attention
by delivering key messages.”
Exhibit 10.2
One of the most common pitfalls is that
companies endeavour to cram too much
information into a small space (for example,
using full pages of type or inappropriate
style and size of typeface), which instantly
crowds the reader’s mind. With so much
information covered in corporate reports,
it is usually necessary to provide plenty of
white space along with graphs and pictures.
Industry-associated pictures combined with
photographs of company directors can
provide a much greater incentive to the
absorption of information than continuous
columns of text and numbers.
The survey undertaken for this Research
Study found that almost all 2004-2005 annual
reports (99%) included pictures, tables and
graphics, such as bar charts, line graphs, pie
charts and area fill charts.10 A 2005 research
report by the Canadian Investor Relations
Institute (CIRI) found very little difference in
annual reports of Canadian and US public
companies.11 As Exhibit 10.3 shows, more than
80% of companies include such elements in
their annual reports.
Exhibit 10.3
A 2006 US survey found that there is a
general preference for an annual report to
contain images and/or illustrations. Investors
showed the strongest preference, as 73%
of them felt that the annual report should
contain more than numbers and text, and that
photos and/or illustrations are an important
element.12 A recent UK research study
examines the implications for policy makers.13
AR Trends 2007 also notes (pages 38 to 40)
that: “Photos, illustrations, maps and graphs
can effectively deliver facts and messages
that the reader might otherwise miss if all of
your information is buried in text. They can
catch the eye of the reader who simply scans
through annual reports or supplement your
investment argument with credible evidence.”
Exhibit 10.4 is consistent with the CIRI findings
in Exhibit 10.3 — more than 80% of companies
Corporate Reporting to Stakeholders
include photographs in their annual reports.
According to Exhibit 10.5, US companies
provided an average of 31 photos/illustrations
in their 2007 annual reports, while Canadian
companies provided an average of 24.
Exhibit 10.4
Exhibit 10.5
The research literature has shown that colour
can affect readability, especially when there
is not enough contrast between the text and
the background (for example, grey text on
grey paper or black text on dark blue paper).
Colour can also affect understandability
(for example, too many different colours or
various shades of the same colour can make a
graph incomprehensible).
Chapter 10 / Enhancing Corporate Reporting
Colours should be carefully chosen because
they tend to set moods: reds are warm and
stimulating; blues are cool, sedative and often
depressing; yellows imply warmth; oranges,
like reds, are stimulating although not as
warm; greens are associated with health,
growth and pleasant situations; and purples
send messages of dignity and reserve. Tints
and pastels are readily forgotten while bold,
vivid colours are remembered.
Exhibit 10.6, an excerpt from the 2005 CIRI
research report, shows that the number of
colours used in annual reports varies with the
market capitalization. The majority of even the
largest companies use four colours or less.
Exhibit 10.6
Delivering Key Messages
When determining what key messages a
corporate report is to deliver, it may be
necessary to focus on only two broad areas
of interest to most stakeholders: company
performance (information that enables
investors to assess easily and quickly a
company’s past performance) and future
prospects (information about the company’s
future, so that investors can decide whether
to continue to invest in it).

According to the National Investor Relations
Institute (NIRI) 2006 Survey Results on
Annual Report Trends and Practices,
respondents stated that the primary narrative
and graphic themes for the annual report
(shown in Exhibit 10.7) are strategic plan
(42%), financial performance (34%), products
(41%) and maintaining/increasing shareholder
value (20%).14
Exhibit 10.7
Exhibit 10.8 is another excerpt from the 2006
publication Report Leadership.15 It emphasizes
that: “There are more and more regulatory
boxes to tick. In the effort to cover them all,
key messages can be lost. The result: a mass
of information, but no clear narrative thread.”
Investors want a clear linkage from markets
to strategy to key performance indicators to
future goals.
Exhibit 10.8
EFFECTIVE COMMUNICATION
STRUCTURE
The problem What investors want
There are more and more regulatory boxes to tick. In the effort
Some form of narrative sequence with a beginning, a middle
to cover them all, key messages can be lost. The result: a mass
and an end.
of information, but no clear narrative thread.
Clear linkage from markets to strategy to key performance
Some companies follow the same structure every year.
indicators to future goals.
Others look at what peers are doing, and follow suit.
But these are off-the-shelf approaches; are they really the An integrated structure:
best way of addressing the issues a company needs
p Don’t mention one thing as being important and then
to explain to investors today?
fail to mention it anywhere else in the report.
Companies should take a step back from their reports and
p Don’t hide important information away at the back of
think about what they need to communicate – and what
the report.
investors want to know.
p Don’t suddenly introduce a new idea and say it’s key
People’s retention of what they read can be alarmingly limited.
to the business halfway through the annual report.
But they’ll absorb and remember much more if it fits into a
compelling story… if facts and opinions are linked together
by a rational structure… and if the investment case and
strategy are presented step-by-step so that the logic is
inescapable. They’re also more likely to be convinced.
Communicating Effectively
The CRA evaluation criteria include “full
disclosure of reliable, relevant information
needed to understand the entity.” To
communicate effectively, they state,
corporate reports should be prepared with
an awareness of multiple audiences. Thestructuring helps
Clear and logical
readers to retain
reports need to be understandable and more of the story –
and to be convinced by it.
meaningful for stakeholders with various
levels of financial literacy, diverse interests
and disparate needs.16
06
A survey on the profile and attitudes of
shareholders provides some insight on
the current level of education of Canadian
shareowners. As Exhibit 10.9 shows, the
Canadian Shareowners Study found that, in
2004, about 42% of the Canadians who are
shareowners are university graduates. This
represents an increase from 37% in 2002.17
Corporate Reporting to Stakeholders
Exhibit 10.9
Exhibit 10.10 is an excerpt from Report
Leadership.18 It emphasizes that: “As
regulators, investors and others demand more
and more disclosure, they find it harder and
harder to locate the information they want.
The challenge for companies is to structure
information so that investors can spend their
time reading the investment case, not looking
for it.”
To facilitate understanding by multiple
audiences, corporate reports should provide:
• clear linkage between the narrative section
of the annual report and the financial
statements;
• summaries of the information included in
each section or even each page or spread;
• good navigational aids on each page/
spread.
Chapter 10 / Enhancing Corporate Reporting
Exhibit 10.10
EFFECTIVE COMMUNICATION
NAVIGATION
The problem What investors want
As regulators, investors and others demand more and
A good table of contents, or even an index.
more disclosure, they find it harder and harder to locate
the information they want. Summaries of the information included in each section or even
each page or spread.
The challenge for companies is to structure information so
that investors can spend their time reading the investment Individual sections clearly delineated.
case, not looking for it.
Clear linkage between the narrative section of the annual
Companies are often reluctant to repeat information in different report and the financial statements.
parts of the report. And certainly, excessive repetition can
Good navigational aids on each page/spread.
be tedious. But if they avoid it too ruthlessly, they can
undermine communication with ‘dip in and out’ readers –
probably the majority of their audience. A good test is to try
reading individual sections on their own: do they tell a clear
and complete story, or would the reader benefit from a little
more context? Companies should not be afraid to repeat
something that appears elsewhere; the average reader
may well not see both instances.
How easily readers can understand a company
is directly related to how material is presented.
In recent years, there has been a trend
toward presentation that begins by looking
at a company overall — its recent results and
strategies for the future — and then moves on
to a detailed discussion of specific operations.
Helpful navigation ensures readers
The first four pages inside the canreport are
find the information companies
considered the most valuable. have taken casual
Many such trouble to publish.
readers will not look further, and even
sophisticated analysts who see dozens of
reports
10 each year need a reason to read on.
These first few pages must have a corporate
profile with a brief description of the company.
Even the largest companies should not assume
that investors know the full extent of their
activities. This description, combined with
some financial highlights, will give readers a
feel for the company and make them want to
read further (refer to Chapter 5).
The letter to shareholders generally comes
next (see A9, President/CEO letter in Chapter
5). A strong letter from the president/chief
executive officer may be the most important
part of the report, ranking behind only the
financial statements. The letter, which should
be relatively short and easy to read, needs to
mention only key points, leaving details for the
body of the report.
The organization of the rest of the report
depends on the type of company. Material
might be organized by division, major
product lines, major markets or other logical
classifications. If a company has several
segments, management might consider
providing an overall review and interpretation
section to outline clearly how the company
is organized before beginning the segment
review of operations (refer to Chapter 7).
A financial summary and analysis (refer to
Chapter 8) containing the audited financial
statements generally follows the review
of operations. Supplementary information
of importance to shareholders, such as
governance disclosures (refer to Chapter 9)
and corporate social responsibilities (refer to
Chapter 6), usually rounds out the corporate
report.19
DISCLOSING ESSENTIAL
INFORMATION
As previously explained in Chapter 4,
the relative importance of each type of
information in the Corporate Reporting
Framework was evaluated using four different
classifications — essential, important, desirable,
and discretionary:
• Essential information should be disclosed
because stakeholders need it to
understand an organization’s activities.
• Important information should be disclosed
because it helps stakeholders interpret an
organization’s activities and enables them
to make appropriate risk/return trade-offs
in their resource allocation decisions.
• Desirable information would normally be
disclosed because it facilitates stakeholder
assessment and analysis of past
performance and future prospects.
• Discretionary describes information
whose relevance to stakeholders depends
mainly on the industry or the specific
circumstances of each organization.
Exhibit 10.11 summarizes the overall results of
the Study Group’s deliberations on the relative
importance of the 43 types of information
disclosures addressed in Chapters 5 to 9. Of
these, 24 are considered essential disclosures
for corporate reporting.
Corporate Reporting to Stakeholders
Exhibit 10.11
Corporate Reporting to Stakeholders
Relative Importance of Information
Discretionary Desirable Important Essential
1 2 3 4
A CORPORATE OVERVIEW        
1 Corporate profile     √  
2 Corporate mission       √
3 Products/services/markets       √
4 Company ownership and control       √
5 Organizational structure     √  
6 Management team     √  
7 Management committees √      
8 Comparative financial highlights   √    
9 President/CEO letter       √
10 Commentary on industry and economy   √    
11 Outlook       √
CORPORATE SOCIAL
B        
RESPONSIBILITIES
1 Human resources   √    
2 Social responsibilities √      
3 Environmental responsibilities     √  
C REVIEW OF OPERATIONS        
1 Overall review and interpretation       √
2 Segment review of operations       √
3 Production information     √  
4 Competitive conditions     √  
5 Response to change       √
6 Forward-looking information       √
7 Risks and uncertainties       √
8 Financial and operating objectives       √
9 Performance compared to objectives       √
10 Research and development √      
11 Significant agreements and contracts     √  
12 Industry specific data     √  

Chapter 10 / Enhancing Corporate Reporting

Exhibit 10.11 (continued)
Corporate Reporting to Stakeholders
Relative Importance of Information
Discretionary Desirable Important Essential
1 2 3 4
D FINANCIAL SUMMARY & ANALYSIS        
1 Analysis of operating results       √
2 Segment analysis       √
3 Analysis of financial position       √
4 Capital investments and expenditures     √  
5 Analysis of cash flows       √
6 Liquidity       √
7 Quarterly financial information     √  
Accounting policy changes
8       √
not yet implemented
Statement of
9       √
management’s responsibility
10 Financial statements/auditor’s report       √
11 Historical summary (minimum 5 years)     √  
12 Performance measures       √
13 Share data       √
E SUPPLEMENTARY INFORMATION        
1 Table of contents/navigation       √
2 Glossary of terms √      
3 Corporate directory       √
4 Shareholder and investor information   √    
   Total  4 4 11 24

Corporate Reporting to Stakeholders

AREAS FOR IMPROVEMENT
The Corporate Reporting Awards 2007
notes that: “The quality of financial reporting
continues to improve. While this poses an
ever-increasing challenge to our judges, the
beneficiary of improved disclosure is the
Canadian investor who is provided greater
access to more transparent and better
information on which to base investment
decisions. This, after all, is what financial
reporting should always be about.”20
Even though corporate reporting continues
to improve, comparing the Study Group’s
conclusions (see Exhibit 10.11) with current
practices highlights the need for additional
effort in the areas summarized in Exhibit 10.12.
In the Study Group’s view, better disclosure
in these seven areas will meet the information
needs of investors more effectively.
Exhibit 10.12
NEED FOR IMPROVED DISCLOSURES
• Financial and operating objectives
• Performance compared to objectives
• Ownership and control
• Management committees
• Response to change
• Competitive conditions
• Research and development
The following provides a brief explanation
of those areas (the numbers in parentheses
refer to the percentage of survey companies
presently reporting such information):
• financial and operating objectives for the
ensuing fiscal year (62%);
• performance compared to objectives
established in the previous fiscal year
(34%);
• ownership and control, including the
majority and minority interests, principal
shareholders and geographic distribution
of shares (22%);
Chapter 10 / Enhancing Corporate Reporting
• management committees, including the
purpose of each committee and the
members (28%);
• response to change, describing how a
company has dealt with changes in the
operating environment and external
factors over the current and previous
years (10%);
• competitive conditions, such as significant
factors that may have an impact on
competitive position and the relative
market or industry share of a company’s
major products and services (62%);
• research and development (R&D), such as
R&D activities, significant new products
and processes and R&D amounts
expensed and/or capitalized during the
fiscal year (41%).
In the Study Group’s view, the quality of
the information disclosures is paramount.
Disclosing unnecessarily detailed information
does not aid understanding and, in fact,
quantity is a poor substitute for quality.
According to a recent survey, companies
do provide what some call “contextual
and non-financial information” about
their performance and prospects, but top
reporters provide a great deal more than
average ones. From the investor community’s
perspective, there is plenty of room for
improvement. Does that mean creating
bulkier reports, requiring more resources
that might be better applied elsewhere? The
survey suggests that companies have enough
latitude to make choices. They can delete
routine but superfluous disclosures. They can
provide insights and related numbers that
management already uses to operate the
business. Taking a top-down, investor-centric
approach may be the future where corporate
reporting is concerned. 21
CONCLUSION
This chapter discusses how corporate reports
can enhance communications with investors
and other stakeholders (Chapter 12 looks
at ways to enhance communications using
company websites). It discusses the concept
of effective communication, the need to
disclose essential information and areas for
improvement. In the Study Group’s view,
corporate reports should be structured so
that the key sections (for example, corporate
overview, corporate social responsibilities,
review of operations, financial summary and
analysis, and supplementary information) are
integrated and complementary.
Because of the importance of effective
communication, some guidance may be
helpful for preparers of corporate reports
(Chapter 11 addresses summary corporate
reporting). The Study Group maintains,
however, that decisions regarding form,
presentation and information content should
be based on management’s judgment.
Management should be encouraged to
make the most meaningful presentation of
an individual company’s circumstances and
should be given the flexibility to do so.
Notes:
1. The quote is from page 25 of the 2007 Business
Review: has it made a difference? A survey of
the narrative reporting practices of the FTSE 350
(London: PricewaterhouseCoopers LLP, 2007), p.
25 (see www.corporatereporting.com).
2. This is a core message in Report Leadership
(London: Joint initiative of the Chartered
Institute of Management Accountants (CIMA),
PricewaterhouseCoopers LLP, Radley Yeldar
and Tomkins plc, November 2006). (More
information is available at www.reportleadership.
com).
3. See, for example, Malcom Smith, “In search
of a lingua franker,” Financial Management
(November 2003), p. 17; John K. Courtis and
Salleh Hassan, “Reading Ease of Bilingual
Annual Reports,” The Journal of Business
Communications, 39:3 (July 2002), pp.395-413.
4. Information about the CICA Corporate Reporting
Awards is on the CICA website
(http://www.cica.ca/1/3/1/index1.shtml).
5. The US Securities and Exchange Commission
published A Plain English Handbook: How to
Create Clear SEC Disclosure Documents in
1998. The Handbook shows how to use well-
established techniques for writing in plain
English to create clearer and more informative
disclosure documents.
6. The awards evaluation criteria are available
on the NIRI website (http://www.niri-chicago.
org/?page=awards_triad_criteria).
7. Report Leadership, op.cit., p. 8. (More
information on this initiative is available at
www.reportleadership.com).
8. The comment is from the CICA Corporate
Reporting Awards 2007, judges’ comments
booklet (Toronto: CICA, 2007), p. 46.
9. AR Trends 2007 was published by
BarnesMcInerney and the Craib Group. The goal
was to explore how companies use traditional
annual reports to inform and engage investors as
effectively as possible, and to collect examples of
best practices. The survey used 130 Canadian and
76 US reports to collect data on 106 items and
characteristics that define an annual report. The
publication is online (http://www.barnesmcin
erney.com/assets/PDFs/ARtrends2007_all.pdf).
10. The CICA is currently preparing an update to the
1993 research report Using Ratios and Graphics in
Financial Reporting. Information on this research
initiative is available on the CICA website
(http://www.cica.ca/2/8/4/9/2/index1.shtml).
Corporate Reporting to Stakeholders
 11. The CIRI report is called 2005 Annual Report
Survey: A study of trends and practices in
the annual report process. The research
questionnaire was completed by 144
respondents in August and September 2005.
12. The survey was conducted by
WithumSmith+Brown, a firm of certified public
accountants and consultants in New Jersey and
Pennsylvania, in collaboration with MGT Design,
a design consultancy. The main purpose was to
determine the value of annual reports and how
annual report readers perceive them. The target
audience was individual investors, portfolio
managers and securities analysts. The survey
results are available online (http://www.withum.
com/pressReleaseFiles/Annual%20Report%20
Survey%20Results.pdf).
13. Refer to the research study Words, Pictures and
Intangibles in the Corporate Report (Edinburgh:
Institute of Chartered Accountants of Scotland,
2007).
14. This was reported at the NIRI e-Learning Forum
on September 26, 2006.
15. Report Leadership, op. cit., p.6. (More issues.
information on this initiative is available at
www.reportleadership.com).
16. As a basis for identifying and addressing the
kinds of information that various stakeholder
groups want or are likely to want, it is important
to consider their information sources and their
objectives. Refer to Canadian Shareowners
Study (Toronto: TSX Group, July 2004). The
survey found that 49% of adult Canadians are
shareholders, either as individuals or participants
in mutual funds. A number of share ownership
surveys are available on the World Federation
of Exchanges website (http://www.world-
exchanges.org/WFE/home.asp?menu=266).
Chapter 10 / Enhancing Corporate Reporting
17. Refer to the Canadian Shareowners Study,
ibid. Since the early 1980s, the TSX has
commissioned quantitative tracking research
that profiles Canadian retail shareowners’
current and projected investment attitudes
and behaviours. A total of 2,000 shareowners
and 500 non-shareowners were interviewed by
telephone between April 8 and May 18, 2004.
18. See Report Leadership, op.cit., p.10. (More
information on this initiative is available at
www.reportleadership.com).
19. In a recent annual report survey conducted
by WithumSmith+Brown, three out of four
participants agreed that the annual report is
the single most important publication a public
company produces. The study included more
than 100 individual investors, portfolio managers
and securities analysts. Nearly 79% of all survey
participants agreed that annual reports are an
important tool in making investment decisions.
And 90% agreed that annual reports should
contain additional information about a company
and its industry, such as sustainability of the
environment or corporate governance, and not
just the company’s financial and shareholder
20. CICA Corporate Reporting Awards 2007, judges
comments booklet (Toronto: CICA, 2007), p 46.
21. For more information, see
PricewaterhouseCoopers LLP Corporate
reporting — a time for reflection, op.cit.
 Chapter 11
Summary Corporate
Reporting
“The key to long-term
success is the quality
of leadership and its
influence on all of a
company’s relationships.
Communication — alongside
strength of character and
strategy — is in turn at the
heart of good leadership
and relationships.
Reporting is, in its turn,
one aspect of strong
communication and a
particularly important
part in creating a sense of
confidence in a company.” 1
INTRODUCTION
Corporate reporting is about accountability and
communications. Companies use their annual reports to fulfill
their legal and regulatory requirements and to communicate
with stakeholders. Annual reports summarize all the crucial
issues that affect a company’s success, explain how they
have influenced the past year’s results, forecast how they
might pan out in the future and describe what is being done
to ensure future success in that environment. Annual reports
cannot, and should not, focus on every single issue that is
relevant to every single stakeholder. They should focus on the
issues that are material to the business as a whole, bring them
together in a single, coherent story and reveal the “value
proposition” of the total business. 2
In addition to discussing ways to enhance corporate
communications using annual reports (see Chapter 10) and
websites (see Chapter 12), the Study Group considered the
merits of summary corporate reporting. It reviewed the
literature in this area, which covers information overload,
complexity in standards and regulations and summary annual
reporting. The Group also surveyed both current practice
and trends, particularly essential information disclosures
in summary annual reports. It then debated how summary
annual reports might be prepared and whether they might
help resolve future challenges for corporate reporting.
Corporate Reporting to Stakeholders
REVIEWING THE LITERATURE
The research literature on “human information
processing” suggests that people can use
only so much information as an aid in their
decision making. Beyond a certain point,
more information does not improve the
process — in fact, it may have an adverse
effect. The following briefly reviews the
literature on information overload, complexity
in standards and regulations and summary
annual reporting.
Information Overload
“Information overload,” which simply
refers to receiving too much information,
is a phenomenon that has been addressed
frequently in cognitive psychological literature,
as well as in the financial field. Both have
shown that decision-making performance can
be impaired by heavy data loads.3
Numerous studies have identified information
overload particularly in the context of
financial and accounting decisions. Based
on literature about organization science,
marketing, accounting and management
information systems, a 2003 research
study examined the theoretical basis of the
information overload discourse and presented
an overview of the main definitions, situations,
causes, effects and countermeasures. It
analyzed the contributions from the last 30
years to consolidate the existing research
into a conceptual framework.4 The study
found that the best ways to fight information
overload are to ensure that the information
received is of high value, is delivered in the
most convenient way and format, is visualized,
compressed and aggregated, and to use
signals and testimonials to minimize the risks
associated with that information.
In the future, public companies are likely to
release even more information than at present.
The frequency of electronic disclosures is also
likely to increase. But investors may find it
Chapter 11 / Summary Corporate Reporting
difficult to keep pace in their understanding
of consolidated financial statements and
note disclosures. It is also unrealistic to
expect complex business and financial
transactions to be reported simplistically.
Consequently, with the increasing volume of
corporate information, along with increasing
complexity in the substance of financial
reporting, investors will undoubtedly place
greater reliance on the advice of analysts and
stockbrokers.5
According to the annual report survey
undertaken for this Research Study, the
average size of current annual reports is 95
pages — ranging from 29 to 223 pages. In
contrast, the average size of 1990 annual
reports was 40 pages — ranging from 9 to 113
pages. In an apparent effort to counteract
the potential for information overload, 98%
of the survey companies gave their website
addresses as sources of additional information
on financial (43%), governance (33%) and
sustainability (14%) matters.
The survey, which analyzed the annual reports
of 125 companies, found that, even in one
year, 2004 to 2005:
• the total number of pages increased by
8.1% to 95 pages, on average;
• the financial statements and notes
increased by 12.3% to 27 pages, on
average;
• the MD&A increased by 7.7% to 30 pages,
on average;
• the voluntary information disclosures
increased by 5.5% to 37 pages, on
average.
In this environment, management must have
more freedom than ever regarding what to say
in the annual report and how to say it, but that
freedom comes with greater responsibility for
real self-analysis and candor — matters which
cannot be mandated by regulatory agencies
or by the accounting profession. Candor will
mean telling investors and other stakeholders
what management is going to do and how
it expects the business and the markets to
perform in the coming year.6
Complexity in Standards
and Regulations
The complexity of financial information
continues to increase as the accounting
profession identifies new areas of concern and
issues detailed standards and implementation
guidance on a wide range of topics, for
example, financial instruments.7 The balance
sheet focus makes explanations of the income
statement both more difficult and more
necessary.8 In addition, preparers are facing
demands from regulators for more disclosure
in external reports in the form of forward-
looking information, segmental reporting,
contingencies, related party transactions and
social and environmental responsibility.
Complexity of Financial Reporting
What are the implications of all this
complexity for financial statements and
related disclosures? This has been the subject
of heated debate, particularly in the US,
which has asked for more extensive financial
disclosure than Canada and the rest of the
world has. Some accountants and managers
have complained that information overload
has set in — that users are overwhelmed
and that the sheer quantity of financial
disclosures has become so excessive that
we’ve diminished the overall value of these
disclosures. But there does not seem to be any
clear, hard evidence of this overload effect.
Although financial statement disclosures
have increased significantly, the costs of
information technology have decreased, and
user accessibility to information processing
technology has improved.9
The full implications of technological
developments for financial analysis and ability
to process increased quantities of complex
information have yet to unfold. It may be that
there is virtually no limit to the amount of
information that may be assimilated by the
capital markets as a whole, but it seems likely
that, even with vastly improved technology,
individuals do have significant limits in their
ability to understand and use it.
In the United States, the FASB and SEC have
initiated efforts to try to simplify disclosures
and eliminate those that are not useful.10
The SEC Committee on Improvements to
Financial Reporting met for the first time in
August 2007. Its overall objective is to make
recommendations on reducing complexity in
financial reporting. The committee’s charter
identifies four areas of focus:
• the current approach to standard setting;
• the current approach to regulating
compliance;
• factors that may drive unnecessary
complexity;
• lessons that can be learned from using
international financial reporting standards
(IFRS).
In Canada, information overload discussions
have revolved mostly around smaller private
organizations.11 Some commentators have even
voiced the opposite concern — that the extent
and timeliness of disclosure requirements of
Canadian companies has been lagging behind
investors’ needs and expectations. Some have
suggested the need to focus not on reducing
information, but rather on improving the ability
of users to navigate through data. Others
have suggested a “two-tier” or “differential”
disclosure. That is, information in addition to
that in published corporate reports may be
made accessible on request for more
in-depth analysis purposes.
The SEC supports that approach,
requiring financial reports filed with it to
be supplemented by more detail than is
customarily given in reports to company
Corporate Reporting to Stakeholders
shareholders. As well as making extensive
additional information available to professional
analysts, companies might consider also
presenting simplified financial statements for
average users. This might well have merit from
a public relations viewpoint, but may have
its own pitfalls when it comes to selecting
information to highlight. It may also require
changes in terminology to make the simplified
statements understandable.
Canada has opted to migrate to International
Financial Reporting Standards (IFRS) by
2010. This principles-based standards
approach — which Canada’s standards
have always adopted — may help address
complexity in accounting and financial
reporting standards. IASB Chairman Sir David
Tweedie recently delivered the 2007 Ken
Spencer Memorial Lecture at the University
of Melbourne, Australia. In “Keep it simple,
stupid! Can global standards be principle-
based?,” 12 he said that a good principles-
based standard must pass four tests:
• Is the standard written in plain English?
• Can the standard be explained simply in a
matter of a minute or so?
• Does it make intuitive sense?
• Does management believe it helps them
understand and describe the underlying
economic activity?
Complexity of Regulation
in Canada
The regulation of financial reporting and
financial markets has undergone significant
change in both the United States and Canada
since 2000. In Canada, the regulatory
regime is particularly complex and politically
controversial, with much speculation about
possible future directions. A review of existing
regulations and related studies led to a 2007
research paper that provides an explanation
of the major jurisdictional issues that affect
financial reporting and regulation in Canada,
including the roles of the key players.13 The
Chapter 11 / Summary Corporate Reporting
paper identifies specific reporting changes
that might be of particular relevance to
prospective capital market researchers.
Where relevant, comparisons are made with
regulatory provisions in the United States,
because the majority of capital markets
research concerns US securities exchanges
regulation, and Canadian regulations
themselves often refer to US regulations as a
point of comparison.14
Because of the lack of a single national
securities regulator in Canada, and overlaps in
federal and provincial jurisdiction and among
regulatory bodies, various players are now
involved in financial markets regulation.15
Ongoing efforts to improve integration
include the new passport system, improved
harmonization of securities regulation and
consideration of mergers of some of the
organizations involved. Other changes have
led to a greater emphasis, in Canada, on
the regulation of continuous disclosure and
corporate governance than was previously
the case. Changes in specific reporting
regulations and guidelines since 2002 have
generally increased the amount of disclosure.
Complexity of Regulation
in the United States
Perhaps the most hotly contested debate
in the history of US securities regulation
has been over the need for mandatory
disclosure. Scholars in the field of
securities regulation have argued both
sides of the debate for years.16 A 2003
research paper describes the US federal
mandatory disclosure system, focusing on
how disclosure obligations have expanded
over the years.17 It discusses the concept
of information overload, considers the
implications of information overload for
securities regulation and discusses what
steps should be taken in response to the
risk of information overload. It also offers a
few thoughts on what information overload
means for the efficient capital market
hypothesis, a key feature of the mandatory
disclosure system.
An increasingly demanding system of
mandatory disclosure, especially in the
aftermath of the Sarbanes-Oxley Act of
2002, makes up the core of the federal
securities laws. Those laws require
companies to make extensive disclosures in
annual reports, quarterly reports, current
reports, proxy statements and other filings
with the SEC. The logic is that, by arming
investors with information, mandatory
disclosure promotes informed investor
decision making, capital market integrity
and capital market efficiency. Once they
are empowered with information, the
argument goes, investors can protect
themselves against corporate abuses and
mismanagement, and there is no need for
the government to keep increasing securities
regulation.
Securities regulation is motivated, in
large part, by the assumption that more
information is better than less. If a securities
regulation regime based on disclosure is
to work, information has to be disclosed.
The ever-growing panoply of statutes, rules
and regulations ensures that companies will
disclose more and more information. But
disclosure of information is not enough.
Securities regulation needs to focus to a
greater extent on the users of information.
For the mandatory disclosure system — or any
disclosure-based regulatory regime — to work
effectively, regulators and policy makers need
to focus on how users process information
and make decisions. In short, investor
psychology matters. It is essential to carefully
consider how investors, analysts, brokers,
arbitrageurs and other market participants
use the information provided. It might be
possible to get more out of disclosure with
less of it.
In summary, ongoing requests for better
disclosure do not have to mean longer
corporate reports. A balance must be struck
between quality and quantity of information,
and that balance must be in the context
of whatever regulation and standards
are applicable, with a view to clarity and
transparency of corporate reporting. Clearly,
there is room for management to streamline
information disclosures by providing a focused
analysis of the quality and sustainability of
performance. It means identifying information
that is superfluous to investors and reporting
information that really matters. Less can be
more when there is good linkage among key
topics, aided by convenient navigation to
help users readily find what they are looking
for. There is also considerable scope for
using company websites to provide more
information or greater detail.
Summary Annual Reporting
Annual reports are a long-established form
of corporate communication. Exhibit 11.1
presents the key audiences considered when
drafting the annual report, according to the
National Investor Relations Institute (NIRI)
2006 Survey Results on Annual Report Trends
and Practices. Respondents stated that the
key audiences include institutional investors
(89%), individual shareholders (80%), financial
analysts (78%), employees (70%) and
customers (50%). It is noteworthy that survey
respondents did not consider government
agencies/regulators as a primary audience for
either the traditional annual report (44%) or
the 10K Wrap (27%).18
Corporate Reporting to Stakeholders
Exhibit 11.1
The concept of Summary Annual Reports
(SARs) originated with a 1981 FASB research
report.19 It received impetus when the
Financial Executives Research Foundation
(FERF) published a two-volume study on
summary annual reporting in 1983. 20 The
results of the FERF-sponsored study indicated
that mock SARs were shorter, more readable
and less expensive. 21
Under this approach, full audited financial
statements required under GAAP, together
with the detailed MD&A, would accompany
the proxy materials sent to shareholders.
Separately distributed SARs would contain
condensed financial statements — along with
the auditor’s report — omitting or abbreviating
many of the traditional notes required by
GAAP.
One of the first summary reports was issued
by McKesson Corporation in June 1987. It
contained 24 pages compared to an average
of 46 pages for the 1984-1986 annual
reports. The 1986 report included 14 pages of
audited financial statements and notes to the
statements, while the 1987 summary report
contained only three pages of condensed
financial statements without notes. Likewise,
the review of operations was condensed to 11
pages in 1987 from 16 pages for 1986. 22
Chapter 11 / Summary Corporate Reporting
This type of report was developed to address
two frequently expressed concerns that:
1. The annual report is too compliance-
oriented to be an effective vehicle for
communicating with investors and other
stakeholders.
2. The structure and content of the
traditional annual report have become too
inflexible to meet the needs of diverse
users. 23
In this regard, the stated purpose of issuing
SARs is to:
• provide readers with relevant and concise
information and alleviate information
overload;24
• encourage stakeholder readership by
making the report easier to read and
understand;25
• enhance investor relations and
management credibility;
• improve the quality and effectiveness of
financial communications;
• reduce the cost of preparing annual
reports;
• allow companies to design an annual report
that doubles as a public relations — as well
as a marketing and recruiting — document.
The concept of SARs raises significant
questions about their implications for
financial reporting and auditing. First, is
the basic premise of a SAR consistent with
the conceptual frameworks developed by
the CICA, FASB or IASB? This is important
because a conceptual framework is supposed
to help resolve financial reporting issues
on communication of financial information
between management and shareholders. 26
Second, what are the auditor’s responsibilities
with respect to a SAR? What assurance can
an auditor provide about the information it
contains?
The issuance of SARs means that auditors
must now, as a minimum:
• ensure that the client’s reporting
schedule allows distribution of full
audited statements prior to the SAR’s
dissemination.
• exercise extreme care in determining the
adequacy of the extent and nature of
disclosures;
• request necessary modifications of the
condensed financial statements if they are
materially misleading or inconsistent with
the full audited financial statements;
• take appropriate action should a client
refuse to make such modifications (such
as withdrawing from the engagement).
SURVEYING CURRENT PRACTICE
The CICA Corporate Reporting Awards 2007
(CRA) assessed the general readability of the
corporate annual report and its effectiveness
as a communications tool. The judges
comment booklet (page 46) states that:
“Two book reports continue to be favoured.
One book contains the MD&A and Financial
Statements. The other book has everything
else. This seems to cater well to the differing
needs of annual report users.”
As part of its deliberations on summary
corporate reporting, the Study Group
surveyed current practice in this area. It
considered corporate reporting formats,
summary reporting disclosures and corporate
reporting trends.
Corporate Reporting Formats
Companies are using various reporting
formats to prepare annual reports in the
United Kingdom, United States and Canada.
In the United States, the National Investor
Relations Institute (NIRI) 2006 Survey Results
on Annual Report Trends and Practices
found that 9% of the respondents prepared
a summary annual report (compared with 7%
in 2004), 32% prepared a traditional annual
report (compared with 46% in 2004) and 56%
prepare a 10-K wrap (compared with 47% in
2004). 27
AR Trends 2007 (page 2) notes that: “In the
United States, most companies now issue only
Form 10Ks. In fact, in 2006 only 35% of US
companies that sent us a copy of their annual
report sent a traditional report. The rest sent
a Form 10K, a Form 10K in a glossy wrap or a
summary report. In contrast, 91% of Canadian
companies on the TSX/S&P and 99% of
companies on the Euro 350 published reports
very similar in content and production quality
to the reports they’ve been issuing since we
began this survey.”
The survey undertaken for this Research Study
found that the vast majority of companies
participating in the CRA program continue
to prepare the annual report as a single
document. There is a migration, however, to
more documents — for example, a “business
review” document and a “financial review”
document. Exhibit 11.2 shows a growing trend
to publishing a summary annual report/
business review in 2004 (8 companies), 2005
(14 companies) and 2006 (20 companies).
Exhibit 11.2
2004 2005 2006
Summary Annual Report /
8 14 20
Business Review
• Financial statements 2 2 4
• No financial statements 6 12 16
• Auditor’s report 1 1 2
• No auditor’s report 7 13 18
All companies that published a summary
annual report also published either a full
annual report and/or a separate “financial
review” document containing the complete
financial statements, auditor’s report and
MD&A. The summary annual report of some
companies included condensed financial
Corporate Reporting to Stakeholders
statements (4 companies in 2006) either
with an auditor’s report (2 companies in
2006) or without (2 companies in 2006).
Exhibit 11.3 lists 20 companies that published
a separate “business review” report in 2006.
That report had a variety of names, including
Annual Review; Annual Summary; Business
Update; Investor Fact Book; Progress Report;
Strategic Overview Report; or Summary
Annual Report. It is apparent that the
separate “business review” document is a
form of summary annual report because 7 of
the 20 companies used the word “summary”
in the title. It is also apparent that summary
annual reports are not limited to companies
in certain industries. A closer examination
indicates that such reports were prepared
by companies in 9 of the 12 industry sectors
surveyed (Financial Services, Life Sciences
and Technology and Small Cap/Venture are
the exceptions).
It is noteworthy that five of these companies
were award winners in the CICA Corporate
Reporting Awards program for 2007 (based
on 2006 annual reports). The average size of
the summary annual reports was 31 pages (28
pages if CN’s 82 page summary is excluded).
All 20 companies provided their summary
annual report in PDF format on the company
website and half of them also provided their
report in HTML format (for ease of access
to these reports, hyperlinks are included in
Exhibit 11.3).
The Study Group maintains that it is crucial
for investors and other stakeholders to
receive a clear, concise summary annual
report containing the key information needed
Chapter 11 / Summary Corporate Reporting
to make informed investment decisions.
Therefore, a summary annual report should
include condensed financial statements,
together with the related auditor’s report.
Furthermore, the summary annual report
should be structured so that the key sections
(for example, corporate overview, corporate
social responsibility, review of operations,
financial summary and analysis, and
supplementary information) are integrated
and complementary to one another. 28 Each
section is closely interrelated with the others
and cannot be viewed in isolation.
The Study Group acknowledges that, to
cater to the differing needs of annual report
users while also meeting legal and regulatory
requirements, it may be necessary to publish
a separate “financial review” document
containing the financial statements, auditor’s
report and MD&A. As well, reference should
be made to the company’s website for the
complete audited financial statements and the
detailed MD&A. 29 Ideally, companies would
make this information available in both PDF
and HTML formats.
In the Study Group’s view, companies should
take advantage of technological developments
that make information easier to use and
more readily accessible, while retaining the
comprehensive quality available today. In other
words, companies should harness the power
of the Internet to allow investors to efficiently
access the particular information in which they
are interested and to choose the format in
which they receive more detailed information.
Corporate reporting on the Internet is
discussed in Chapter 12.
Exhibit 11.3
Summary Corporate Reports for 2006
Industry # of Format
Sector Company Name Report Title pages PDF Online
Communications and Media

1 BCE Inc. Business Update 32 PDF HTML

2 TELUS Corporation Business Review 32 PDF HTML

Consumer Discretionary 

3 Canadian Tire Corporation Limited Annual Report 24 PDF

4 George Weston Limited Annual Summary 20 PDF HTML

5 Loblaw Companies Limited Annual Summary 28 PDF HTML

Diversified Industries 

6 Alcan Inc. Annual Review 32 PDF HTML

7 North West Company Fund Summary Annual Report 25 PDF

Forest Products 

8 Cascades Inc. Review of Operations 20 PDF

Industrials and Energy 

9 Canadian National Railway Company Investor Fact Book 82 PDF

Mining 

10 Barrick Gold Corporation Annual Review 29 PDF

11 Cameco Corporation Business Review 28 PDF HTML

12 Potash Corporation of Saskatchewan Inc. Summary Annual Report 42 PDF HTML

13 Sherritt International Corporation Annual Report 21 PDF

Oil and Gas 

14 EnCana Corporation Annual Report Summary 26 PDF HTML

Annual Report: Corporate

15 NAL Oil & Gas Trust 28 PDF
Profile

16 Nexen Inc. Summary Report 28 PDF

17 Petro-Canada Strategic Overview Report 24 PDF HTML

18 Shiningbank Energy Income Fund Annual Report 40 PDF

19 Talisman Energy Inc. Annual Report Summary 40 PDF HTML

Utilities and Pipelines

20 Emera Incorporated Progress Report 19 PDF

Corporate Reporting to Stakeholders

Summary Reporting Disclosures
Following up on the survey of summary reporting practices and the identification of trends, the
Study Group analyzed a few 2006 summary annual reports for information content and depth
of disclosure. The information content analysis, aimed at identifying the types of information
disclosed and the level of detail, consisted of examining the summary annual reports for Potash
Corporation of Saskatchewan Inc., Talisman Energy Inc. and North West Company Fund.

Exhibit 11.4 highlights the results of this analysis. Of 43 information disclosure items proposed
in the Framework for Corporate Reporting to Stakeholders (refer to Chapter 4), Potash covered
39 while Talisman and North West each covered 23. Potash provided more than the minimum
information required for nine of the 39 items, less than the minimum for one item and disclosed
supplemental information on sustainability and governance. Talisman and North West also
disclosed supplemental governance information.

Chapter 11 / Summary Corporate Reporting

Exhibit 11.4
Summary Annual Report Analysis

A. Corporate Overview

• Each of the three companies covered nine of 11 items of this category.

• Potash provided more information than the minimum for three items. Talisman provided more
than the minimum for two items and less than the minimum for one item. North West provided
more than the minimum for one item and less than the minimum for one item.
• None of the three companies provided information about Company Ownership and Control or
Management Committees.

B. Corporate Social Responsibility

• Potash covered the three items, providing more than the minimum for two items. It added
supplemental information about Sustainability and Governance.
• Talisman covered one item and added supplemental information about Governance.
• North West covered two items and added supplemental information about Governance.

C. Review of Operations

• Potash covered 10 of 12 items, providing more than the minimum for two items.
• Talisman covered four items, providing more than the minimum for one item and less than the
minimum for one item.
• North West covered three items, providing the minimum for all.
• None of the three companies provided information about Significant Agreements and
Contracts or Research and Development.

D. Financial Summary and Analysis

• Potash covered 11 of 13 items, providing more than the minimum for one item.
• Talisman covered four items, providing less than the minimum for one item.
• North West covered six items, providing more than the minimum for one item.
• None of the three companies provided information for Segment Analysis, Quarterly Financial
Information or Accounting Policy Changes Not Yet Implemented.

E. Supplementary Information

• Potash and Talisman covered all four items in this category, while North West covered two.
• All three companies provided less than the minimum for the Corporate Directory and more
than the minimum for the Shareholder and Investor Information.

Corporate Reporting Trends

In addition to looking at corporate reporting formats, the Study Group made an effort to
identify trends in corporate reporting. It analyzed the changes in the 2004, 2005 and 2006
annual reports of the 12 award winners for their respective industry sectors in the 2006 CICA
Corporate Reporting Awards program (based on 2005 annual reports). The analysis compared
the annual reports of each company over the three-year period for changes in information
content, format and navigation.

Corporate Reporting to Stakeholders

Information Content
The content analysis looked for major
changes in three areas — information
added, information deleted and information
reorganized.
The analysis showed that 2006 reports
provided more information than ever
before, mostly because of corporate
growth, new regulations and the goal of
overall transparency. For example, oil and
gas company Nexen Inc. expanded its
compensation section considerably; Catalyst
Paper Corporation provided more segmented
information; Enbridge Inc. gave an in-depth
description of strategy in its MD&A; Matrikon
Inc. added a quarterly results section; and
Brookfield Properties Corporation added
environmental information at the front of its
annual report. More companies also provided
scorecards on their performance, which is an
essential ingredient in corporate reporting.
For example, award-winning companies, such
as TELUS Corporation, BMO Financial Group
and Potash Corporation of Saskatchewan Inc.,
offered specific information on achievements
and disappointments, compared with
previously published specific goals.
Some companies removed information
previously provided, although all of it can
be located on their website. Canadian Tire
Corporation Limited provided a summary
annual report for the first time. Catalyst
decided to do away with its strategy,
products and services, and governance
information; Brookfield no longer offered
information on its management team;
and Agrium Inc. thought directors and
management biographies did not need of contents. Potash prepared a color-coded
to be included in the annual report.
Several companies reorganized their
information, mostly moving information on
organizational structure, segmented business
results, business risk and risk management,
Chapter 11 / Summary Corporate Reporting
strategy, board of directors, health and safety,
governance, sustainability and corporate
social responsibility from more traditional
areas in the annual report to the MD&A
section or the president/CEO letter.
Format
The format analysis looked for major changes
in four areas — document format, number of
pages, graphics and pictures. Three of the 12
industry award winners changed to a two-
volume format for 2006. Canadian Tire, Nexen
and Potash prepared a summary annual
report and a separate volume containing
the financial statements and the MD&A.
The total number of pages increased for
all companies by 20% on average. This was
primarily because of the financial statements
and the MD&A. About half of the companies
increased the number of pages with graphics.
In particular, Potash put graphics on 24 of
the 89 pages in its 2005 and 2006 annual
reports. This was an increase of 50% over
2004, although the total number of pages
was the same. Four companies increased
the number of pages with pictures in 2006,
mainly in the front part of the annual report.
Navigation
The navigation analysis looked for major
changes in the annual report to facilitate
the search for specific information or to
manage information overload. The analysis
examined both the table of contents and the
way company websites are used to facilitate
communications with investors and other
stakeholders.
Most companies provided a detailed table
table of contents in 2005 and, in 2006, added
a short explanation of what can be found in
the annual report and in the MD&A. BMO had
an explanation of each section in its table
of contents. To avoid duplication, several
companies provided internal references to
other pages in the annual report. For example,
Matrikon added page numbers references
within its MD&A section linking to information
provided elsewhere in the annual report.
All 12 companies referred to their websites
for additional information, but the approach
varied significantly from one company to
another. For example, TELUS used website
reference extensively — its 2006 annual report
contained 52 references to the website (48 in
2005 and 44 in 2004). It identified specific
webpages (URLs) for locating information.
BMO and Nexen provided numerous
references to their websites without
identifying the URLs. Potash provided
keywords in the summary annual report to
facilitate access to its online annual report.
A number of companies also noted that
additional information was available on the
regulatory websites (SEDAR and/or EDGAR)
and provided the URL.
Whatever the challenges ahead, it is evident
that annual reports are an integral part
of corporate reporting to stakeholders.
According to a 2005 Canadian Investor
Relations Institute survey, “of all the tools
used by publicly traded companies to
communicate with their investors, the annual
report offers the most comprehensive picture
of where the company has been and where
it is going.” In the Study Group’s view, the
quality of that picture gets better every year.
WithumSmith+Brown, Certified Public Accountants
and Consultants30
FACING THE CHALLENGES
In preparing this Research Study, the
Study Group observed that regulatory and
standard-setting bodies are constantly
“improving” the rules to protect the interests
of investors and to make sure they have
good information. As a result, disclosure
requirements increase and information
disclosures become more complex.
Due to the overwhelming amount of
information now required to be disclosed,
it is no longer possible for a company to
adequately address everything in the annual
report. Various attempts have resulted in
extraordinarily long, cumbersome annual
reports or superficial coverage of important
topics. The Study Group, therefore,
considered whether a summary annual
report would be of use to investors and other
stakeholders.
Preparing a Summary
Annual Report
What information might be included in a
summary annual report? As previously noted,
for a start, condensed financial statements,
together with an auditor’s report. In addition,
reference should be made to the company’s
website for the complete audited financial
statements and the detailed management’s
discussion and analysis to meet legal and
regulatory requirements (corporate reporting
on company websites is discussed in
Chapter 12).
Chapter 10 of this Research Study (see Exhibit
10.11) summarized the overall results of the
Study Group’s deliberations on the relative
importance of the 43 types of information
disclosures addressed in Chapters 5 to 9. Of
these, 24 are considered essential disclosures
for corporate reporting. Exhibit 11.5 lists the
essential information disclosures for investors
and other stakeholders.
Corporate Reporting to Stakeholders
Exhibit 11.5
ESSENTIAL INFORMATION DISCLOSURES
Corporate Overview
1. Corporate mission
2. Products, services and markets
3. Company ownership and control
4. President/CEO letter
5. Outlook
Review of Operations
6. Overall review and interpretation
7. Segment review of operations
8. Response to change
9. Forward-looking information
10. Risks and uncertainties
11. Financial and operating objectives
12. Performance compared to objectives
Financial Summary and Analysis
13. Analysis of operating results
14. Segment analysis
15. Analysis of financial position
16. Analysis of cash flows
17. Liquidity
18. Accounting policy changes not yet
implemented
19. Statement of management’s responsibility
20. Financial statements and auditor’s report
21. Performance measures
22. Share data
Supplementary Information
23. Table of contents
24. Corporate directory
Chapter 11 / Summary Corporate Reporting
Financial and business information disclosures
may be communicated as a comment, an
explanation or an analysis:
• A comment refers to a simple description,
perhaps a sentence or two, that may
also include a reference to additional
information sources, such as a company
website.
• An explanation refers to a concise
summary that may include a narrative and
a table, perhaps a page in length.
• An analysis is a detailed discussion that
may include narrative and performance
measures presented in tables, charts or
graphs.
Exhibit 11.6 summarizes the Study Group’s
proposals on the level of disclosure a
summary annual report should present.
Chapters 5 to 9 set out numerous examples
illustrating current practices at the comment,
explanation and analysis level of disclosure.
Exhibit 11.6 also suggests keywords for
navigating between the summary annual
report and the company’s website where
more detailed, updated information can
be made available to investors and other
stakeholders on a timely basis.
Exhibit 11.6
Summary Annual Report Disclosures and Keywords
Comment Explanation Analysis Keywords
A CORPORATE OVERVIEW OVERVIEW
1 Corporate profile √  Profile
2 Corporate mission √  Mission
3 Products/services/markets √  Business
4 Company ownership and control √  Ownership
5 Organizational structure √  Organization
6 Management team √  Management
7 Management committees √  Committees
8 Comparative financial highlights √  Highlights
9 President/CEO letter √ CEO letter
10 Commentary on industry and economy √  Industry
11 Outlook √  Outlook
B CORPORATE SOCIAL RESPONSIBILITIES CSR
1 Human resources √  HR
2 Social responsibilities √  Social
3 Environmental responsibilities √  Environmental
C REVIEW OF OPERATIONS OPERATIONS
1 Overall review and interpretation √  Overview
2 Segment review of operations √  Segments
3 Production information √  Production Data
4 Competitive conditions √  Competition
5 Response to change √  Adaptability
6 Forward-looking information √  Forward-looking Data
7 Risks and uncertainties √  Risks
8 Financial and operating objectives √ Goals
9 Performance compared to objectives √ Scorecard
10 Research and development √  R&D
11 Significant agreements and contracts √  Contracts
12 Industry specific data √  Industry Data
D FINANCIAL SUMMARY & ANALYSIS FINANCIAL
1 Analysis of operating results √  MD&A
2 Segment analysis √  Segment Data
3 Analysis of financial position √  MD&A
4 Capital investments and expenditures √  Capital Exp
5 Analysis of cash flows √  MD&A
6 Liquidity √  Liquidity
7 Quarterly financial information √  Quarterly Data
8 Accounting policy changes not yet implemented √  Pending Policies
9 Statement of management’s responsibility √  Mgmt Responsibility
10 Financial statements/auditor’s report √  Financial Data
11 Historical summary (minimum 5 years) √  Historical Data
12 Performance measures √  Metrics
13 Share data √  Share Data
E SUPPLEMENTARY INFORMATION SUPPLEMENTARY
1 Table of contents/navigation √  Contents
2 Glossary of terms √  Glossary
3 Corporate directory √  Directors
4 Shareholder and investor information √  Investor Info

Corporate Reporting to Stakeholders

During extensive discussion of the merits of
preparing a summary annual report, the Study
Group reached consensus on the following
seven-step approach to address information
overload and complexity concerns and, at the
same time, make better use of the current
technology:
1. Begin by preparing condensed financial
statements and the related auditor’s
report.
2. Set out the company’s goals/targets and
scorecard, then draft the President/CEO
letter.
3. Focus on information that is essential to
investors and other stakeholders (see
Exhibit 11.5).
4. Disclose pertinent information listed in the
Framework For Corporate Reporting at
an appropriate level of detail — comment,
explanation or analysis (see Exhibit 11.6).
5. Refer to examples of current disclosure
practices by award-winning companies
in the CICA Corporate Reporting Awards
program (see Chapters 5 to 9).
6. Use keywords and URLs (hyperlinks in the
PDF document) to navigate between the
summary annual report and the company
website (see Exhibit 11.6).
7. Prepare an online annual report to
complement and supplement the
hardcopy report (see Exhibit 11.7).
Chapter 11 / Summary Corporate Reporting
Regarding scorecards, the CICA Corporate
Reporting Awards 2007 (CRA) evaluation
criteria state:31
“Scorecards should contain specific,
measurable goal/target information for
the year under review and the next year.
Progress toward achieving long term goals/
targets should also be cited. For example,
scorecard information provided by award-
winning companies deal with industry sector
performance (shareholder return & earnings
range), supplier/customer leadership (sector
ranking as preferred supplier, sales volume
by major business line, customer complaints
etc), cost and efficiency control (product
cost reductions, transportation & distribution
savings), capital expenditures, etc. Each cited
goal/target for the year under review should
be rated by the organization as achieved,
partially achieved or did not achieve. It is not
very helpful to cite the goals/targets but not
to rate performance against them. It is not
satisfactory to provide little or no specific
measurable scorecard information, or to
merely state that the company expects
to do better next year.”
Regarding the president’s letter to
shareholders, the CRA evaluation criteria
cover the following matters:
• corporate strategies/goals assessed
against progress in achieving them and
how shareholder value is created;
• company developments;
• market and industry issues;
• key performance indicators, capability to
improve performance and deliver results;
• forward-looking, growth strategy, future of
industry, risks & uncertainties.
In the Study Group view, it is crucial that
companies prepare an online annual report
to complement and supplement the printed
report. Exhibit 11.7, an excerpt from the 2005
annual report of ONEX Corporation, is an
example of cross-referencing from the hard
copy to the company website. The use of
company websites is explored in Chapter 12
and Appendix D.
Exhibit 11.7
Future of Corporate Reporting
In the Study Group’s view, it is now time to
look at the future of corporate reporting
in Canada. Clearly the CICA, the Canadian
Securities Administrators and the international
accounting and auditing standards boards will
all help shape tomorrow’s corporate reporting.
The international public accounting firms
will also play an important role in the global
markets.
Guidance issued by PricewaterhouseCoopers
LLP in 2007 offers one model for the future.
It spells out what investors want (see Exhibit
11.8) and suggests seven pillars for effective
communication of the future:32
1. Communicate targets for the key
performance indicators (KPIs) used to
manage your business.
2. Demonstrate the linkage of other content
areas within your reporting to your longer-
term objectives and the strategies to
achieve those objectives.
3. Explain the resources available to
your company that help to attain your
objectives and how they are managed.
4. Describe the principal risks and
uncertainties that may affect your
company’s long-term value or prospects.
5. Provide quantified data on the trends and
factors likely to affect your company’s
future prospects.
6. Spell out any uncertainties underpinning
forward-looking information.
7. Clarify the significant relationships with
stakeholders that are likely to influence
the performance of your company and its
value.
Corporate Reporting to Stakeholders
A 2007 PricewaterhouseCoopers LLP global
survey tells corporate leaders to ask the
following questions as they review their
company’s reporting practices:33
• If you were an investor, could you evaluate
your company’s long-term potential based
on your external communications?
• Are you helping investors understand
the “Big Picture” by providing sufficient
contextual information to assess
the sustainability of your company’s
performance and growth?
• Is it easy to understand the trends in your
revenues and operating profits and the
drivers that cause them?
• Are you taking the opportunity to explain
how value is created and how you
measure value creation?
• Is there sufficient detail in segment
disclosures to provide a true understanding
of your various components?
• How consistent is your segment reporting
across different communication vehicles?
• Do you explain how you measure success
in your strategic objectives by means of
Chapter 11 / Summary Corporate Reporting
defined key performance measures? Do
you display these measures prominently in
your communications?
• Wherever possible, have you created a
forward-looking picture of the business,
against which short-term financial
performance can be understood?
• Have you identified any surplus
information in your reporting that could
be reduced or eliminated to improve the
clarity of your messages?
Exhibit 11.8
MODELLING THE FUTURE
STRATEGY
The problem What investors want
What is a company trying to achieve? How? Why?
To assess the quality and sustainability of a company’s
A clear statement on where the company is heading.
performance, investors need to be clear about its strategy. An understanding of:
They need to know how management intend to address p The company’s strategic priorities.
market trends, the threats and opportunities that they
p The resources that must be managed to deliver them.
represent. They also need to understand the relationship
between strategic objectives, management actions and p How strategic success is measured.
executive remuneration. Then they can judge the
appropriateness and success of management actions
A timeframe over which to assess strategic success.
to deliver the strategy… and what to expect in the future. Explanation of performance against strategic objectives.
Many companies make reference to their objectives and A clear link between strategy, performance and executive
strategies. Yet few strategic statements provide the detail remuneration.
that enables investors to understand the priorities for action
or the resources that must be managed to deliver results.
Few give explicit guidance on how success is measured, or
over what period of time it should be assessed.
Many strategic statements lack the detail
needed to understand the priorities for action,
the resources that must be managed, and how
success is measured.
18
CONCLUSION
The terms of reference for this Research
Study asked the Study Group to identify
what information is needed in corporate
reports, beyond the financial statements,
and to provide guidance on the presentation
of such information in corporate reporting
to stakeholders. In response, the Study
Group considered the merits of summary
corporate reporting in communicating with
investors and other stakeholders. It reviewed
the literature in this area and surveyed both
current practice and trends in summary
annual reports. It then debated how
summary annual reports might be prepared
and whether they might help address future
challenges for corporate reporting.
In the Study Group’s view, a company should
convey key information to investors in the
form of a summary annual report and provide
supplementary information on the company’s
website in a format that enhances the ability
of investors and other stakeholders to
effectively use the more detailed information.
The website version of the summary annual
report should be presented in a user-
friendly format that permits investors,
financial intermediaries, analysts and other
stakeholders to move readily back and forth
between the information in the summary
annual report and the related information
on the company’s website. Investors and
other stakeholders accessing the Internet
information should be able to permanently
retain an electronic version of the summary
annual report and other information.
Alternatively, the information could be
provided in paper copy to any investor who
prefers to review more detailed information in
that format.
In addition, companies should be encouraged
to take advantage of technological
developments that make information easier
to use and more readily accessible, while
retaining the comprehensive quality available
today. In other words, companies should
harness the power of the Internet to allow
investors to efficiently access the particular
information in which they are interested
and to choose the format in which they
receive more detailed information. Corporate
reporting on the Internet is discussed in
Chapter 12.
Corporate Reporting to Stakeholders
 Notes:
1. The quote is from the preface to the report The
Future of Corporate Reporting: State of Play
(February 2007), Tomorrow’s Company. impact of new standards dealing with financial
The report is available online instruments. It notes that the standards may
(www.tomorrowscompany.com).
2. This perspective on corporate reporting is
discussed in The Future of Corporate Reporting,
ibid, pp 13-14.
3. Ross M. Skinner and J. Alex Milburn, Accounting
Standards in Evolution (Toronto, CICA, 2001), pp.
507-512.
4. Martin J. Eppler and Jeanne Mengis, “A
Framework for Information Overload Research
in Organizations: Insights from Organization
Science, Accounting, Marketing, MIS, and Related
Disciplines, Paper # 1 (Lugano: Universita della
Svizzera Italiana, September 2003).
5. Corporate Reporting: Is It What
Investment Professionals Expect? (London:
PricewaterhouseCoopers, November 2007). This
report looks at the information that companies
provide, and whether investors and analysts
from the UK, US, Canada, Germany, France and
Australia have the information that they need
to assess corporate performance. The findings
show a significant expectation gap between the
importance investors attach to key information
and the adequacy of the information they
receive. The report is available online (http://
cfodirect.pwc.com/CFODirectWeb/download?s
ourcetype=contentattachment&content=MSRA-
78VPD8&filename=PwC_CRSurveyNov07.pdf).
6. This point was articulated very well by D.
Haggie, “The Annual Report as an Aid to
Communication,” Accountancy (August 1984),
pp. 66-69. The author argued for a policy
of “warts and all” disclosure. He recognized
that injudicious phraseology can be harmful
and unsophisticated candor can be counter-
productive, but there is a happy medium
between total secrecy and (fiscally speaking)
indecent exposure. Annual reports should be
designed frankly and graphically to interpret the
facts behind the figures; to put in perspective
a year in the life of a company. Success should
not be an excuse for overkill. Failure should
not be swept under the carpet, with apologetic
murmurs from the directors involved. Credibility
is the key. Since figures seldom lie, the message
accompanying them, whether by the chairman
or in the directors’ report, must be an accurate
reflection of them. Credibility and confidence are
the result of this kind of corporate plain-dealing,
quite apart from ethical considerations.
Chapter 11 / Summary Corporate Reporting
7. Kate Ward, “Mountain or Molehill,” CAmagazine
(November 2007). This article examines the
have no effect on some private enterprises.
For others, the effect will be significant.
The standards expand the use of fair-value
measurement for certain assets and liabilities.
In many cases, use of fair-value measurement
is at the discretion of management. However,
certain activities will dramatically increase the
level of accounting complexity (see http://www.
camagazine.com/4/1/0/4/5/index1.shtml).
8. PricewaterhouseCoopers interviewed more than
50 professional investors around the world in
late 2006 about their use of the balance sheet
in their analysis of companies’ performance.
The survey results, collated in Measuring assets
and liabilities — Investment professionals’ views
(released February 2007) contribute to a deeper
understanding of attitudes and practices in the
investment community.
9. See Accounting Standards in Evolution, op.cit,
pp. 507-512. It is interesting that, in a letter dated
August 31, 1988, the CICA Accounting Standards
Committee (AcSC) expressed concerns in
response to the MD&A requirements stating
there was a potential for “information overload.”
10. The Financial Executives International (FEI)
notes that the complexity and technical
demands of accounting and disclosure standards
have increased considerably in recent years.
It believes complexity harms the ability of
users of financial statements to understand the
information provided and impairs the ability
of preparers to explain their financial results
in a meaningful way. Investors are not well
served by the drain on shareholder wealth from
the excessively complex compliance process.
The capital markets are not well served when
scarce financial resources are not used in value-
enhancing business initiatives but to satisfy
disclosure and accounting requirements that
fail to meet cost-benefit tests. Issued in 2007,
the FEI’s “Four Point Plan” recommends steps
to address complexity, including a call for all
stakeholders in the financial reporting process
to come together to form an independent
“Committee on Complexity.”
11. Questions about standards overload are
discussed by Yan Barcelo in “Standards
Overload Blues,” CAmagazine (March 2007)
(see http://www.camagazine.com/index.cfm/
ci_id/35948/la_id/1).
12. The lecture by Sir David Tweedie, “Keep
it simple, stupid! Can global standards be
principle-based?” is available online as a PDF file
(see http://www.frc.gov.au/reports/other/2007_
ken_spencer_memorial_lecture.pdf), an
MP3 audio or slides (see http://harangue.
lecture.unimelb.edu.au/ilectures/ilectures.
lasso?ut=1027&id=31109).
13. See Carla Carnaghan and Sally P. Gunz ,
“Recent Changes in the Regulation of Financial
Markets and Reporting in Canada,” Accounting
Perspectives, Volume 6 (January 2007),
pp. 55-94; (http://caaa.metapress.com/(nrhum 20. Refer to Deloitte Haskins & Sells, Summary
kaskglicc45xukvqc45)/app/home/contribution.as
p?referrer=parent&backto=issue,3,4; Toward More Readable Annual Reports
journal,1,1;linkingpublicationresults,1:120430,1).
14. In 2005, the Capital Markets Leadership
Task Force comprising a common interest
group of stakeholders administered by the
Canadian Institute of Chartered Accountants
commissioned J. Efrim Boritz, FCA, to prepare a
Discussion Paper on Maintaining Quality Capital
Markets Through Quality Information. Published
in April 2006, the Discussion Paper portrays
the current environment and proposes ideas
for enhancing financial information in Canada’s
capital markets. The paper is available on the
CICA website (http://www.cmltf.ca/index.cfm/
ci_id/30808/la_id/1.htm).
15. See Blueprint for a Canadian Securities
Commission, Crawford Panel on A Single
Canadian Securities Regulator (June 7, 2006)
(http://www.crawfordpanel.ca/Crawford_Panel_
final_paper.pdf#search=%22Blueprint%20
for%20a%20Canadian%20Securities%20
commission%22).
16. An example of the ongoing debate is the series
of articles in the June 2007 Special Issue of
the Journal of Corporate Finance. The articles
focus on SEC Regulation and Corporate
Finance. The lead article, by Janet Kiholm Smith,
“Evaluating the Boundaries of SEC Regulation”
(pp. 189-194), provides a rationale for studying
recent regulatory changes and for addressing
the overarching question of how to define the
boundaries of SEC intervention in financial
markets. The study provides an overview of
papers in this special issue and concludes
with suggestions for how policymakers can
use research to better evaluate the costs and
benefits of regulation.
17. Refer to Troy A. Paredes, “Blinded By The Light:
Information Overload and Its Consequences for
Securities Regulation,” Washington University
Law Quarterly, Volume 81, pp. 417-485.
18. This was reported at the NIRI e-Learning Forum
on September 26, 2006. A “10K wrap” is the
required SEC annual filing Form 10K with a
cover wrapped around it to provide additional
information, such as products/services,
president/CEO letter, highlights and shareholder/
investor information.
19. See P. Frishkoff, Reporting of Summary
Indicators: An Investigation of Research and
Practice (Stamford, Connecticut: Financial
Accounting Standards Board, 1981).
Reporting of Financial Information: Moving
(Washington: Financial Executives Research
Foundation, 1983).
21. See Summary Reporting of Financial Information,
op. cit, pp. 5-12, for a review of the outcome of
the study and proposed minimum disclosure
guidelines.
22. For a closer look at how one of the first
summary annual reports was produced, refer
to M. Macklin, “How McKesson is Pioneering
the Summary Annual Report,” Journal of
Accountancy (May 1988), pp. 48-50.
23. See R.H. Tondkar, E.N. Coffman and B.M.
Cunningham, “New Developments in Summary
Annual Reports,” CPA Journal (September 1988),
pp. 78-79. The primary users of annual reports
are, according to the authors, the company’s
shareholders. Shareholders can be divided into
two broad groups — sophisticated investors (e.g.,
institutional investors) and less sophisticated
investors (e.g., average shareholders). This
classification provides the basis for differential
reporting, which recognizes that users of
financial reports have different needs for
information and varying abilities to understand
such information. Differential reporting seems to
provide the foundation and primary justification
for summary annual reporting.
24. Recent academic research suggests that the
summary annual report could provide a solution
to information overload, as well as improve
communications between company management
and shareholders. See, for example, Aline Girard
and Philémon Rakoto, “L’envoi systématique
du rapport annuel global aux actionnaires :
une pratique en voie de disparition? Revue
international de gestion, vol. 30, no.3, automne
2005, p. 80-86 and “Summary Annual Reports:
In or Out?” Proceedings, 26th Annual Conference
of the European Accounting Association, April
2-4, 2003, Sevilla, Spain. Also refer to Philémon
Corporate Reporting to Stakeholders
 Rakoto, “Caractéristiques de l’information,
surcharge d’information et qualité de la
prédiction,” Comptabilité, Contrôle, Audit, Tome
11, vol. 1, mai 2005, p. 23-38.
25. Stanford Research Institute International,
Investor Information Needs and the Annual
Report (Washington: Financial Executives
Research Foundation, 1987). This landmark study
concluded that efforts to clarify, summarize and
present information in a more understandable
form will add value and be well received by
report readers. Merely reducing the amount of
information, however, will be viewed negatively.
26. C. Lee and D. Morse, “Summary Annual Reports,”
Accounting Horizons (March 1990), pp. 39-50. A
study of 32 initial SARs (issued before August
1988) found that companies use a wide range
of different levels of aggregation and a variety
of innovative reporting formats and style. Most
SARs eliminated notes to financial statements,
although many compensated by expanding or
completely redesigning their financial review
section. There was a tendency toward more
verbal presentation, with graphs and charts for
numerical data.
27. As reported at the NIRI e-Learning Forum on
September 26, 2006.
28. This position is mirrored in the June 7, 1989
Statement of the Financial Analysts Federation
on Summary Reporting. The Securities and
Exchange Commission’s response of July 20,
1989 acknowledged the concern regarding the
multiplicity of documents but noted that annual
reports to shareholders are not necessary as
long as the required information is provided to
shareholders at the appropriate time (e.g., in
the proxy statement, Form 10K or electronic
filing with the EDGAR system). A copy of this
correspondence is reproduced in Appendix B
to the Financial Analysts Federation Corporate
Information Committee Report 1988-1989.
Chapter 11 / Summary Corporate Reporting
29. Appendix E to this Research Study provides an
overview of the requirements for “management’s
discussion and analysis,” which is also called
“narrative reporting” in some countries.
30. In a 2006 annual report survey conducted
by WithumSmith+Brown, three out of four
participants agreed that the annual report is
the single most important publication a public
company produces. The study included more
than 100 individual investors, portfolio managers
and securities analysts. Nearly 79% of all survey
participants agreed that annual reports are an
important tool in making investment decisions
about companies. And 90% of all participants
agreed that annual reports should contain
additional information facing the company
and its industry, such as sustainability of the
environment or corporate governance, and not
just the company’s financial and shareholder
issues. The survey results are available online
(http://www.withum.com/pressReleaseFiles/
Annual%20Report%20Survey%20Results.pdf).
31. Information about the CICA Corporate
Reporting Awards is on the CICA website
(http://www.cica.ca/1/3/1/index1.shtml).
32. A discussion of these seven pillars is provided
in the Guide to forward-looking information
(London: PricewaterhouseCoopers LLP, 2007),
pp. 10-13. Practical examples are set out
on pages 14-25 (available at
www.corporatereporting.com).
33. Corporate reporting – a time for reflection
(London: PricewaterhouseCoopers LLP, 2007),
p. 21 (available at www.corporatereporting.com).
 Chapter 12
Corporate Reporting
on the Internet
“There’s nothing magical
about excellent electronic
disclosure. It involves
making the best use of
technology to make the
most relevant information
readily available to users.” 1
INTRODUCTION
Corporate reporting has changed dramatically since the
CICA Corporate Reporting Awards (CRA) program was
launched 56 years ago. At one time, the annual report was
the only form of reporting. Companies, investors and other
stakeholders are now shifting their focus to the Internet. It is
becoming the primary medium for communicating corporate
financial and business information online – corporate news,
quarterly earnings releases, annual reports, audio and/or video
conferencing, e-mail alerts and corporate blogs. 2
From a corporate reporting perspective, the 2007 CRA
program observed that: “Electronic reporting of annual
[reports], interim financials and press releases is now
standard practice for virtually all listed corporations.
Continued improvement in the use of technology is noticed.”3
From an investor and other stakeholder perspective, a TSX
Group survey observed that attitudes toward technology are
changing (see Exhibit 12.1). There is a continued increase in
the proportion of shareowners agreeing that the Internet is an
essential tool for providing investment information. About 75%
of Canadians, in general, and about 90% of shareowners, in
particular, have Internet access (see Exhibit 12.2).4
Because corporate reporting on the Internet is increasing, the
Study Group decided to review the pertinent literature in this
area, survey the information content of corporate websites
and discuss the challenges created by the rapid advancement
of information technology.
Corporate Reporting to Stakeholders
Exhibit 12.1
Exhibit 12.2
REVIEWING THE LITERATURE
The impact of information technology was
briefly addressed in the 1991 CICA Research
Study Information to be included in the
Annual Report to Shareholders (Chapter 9)
as follows:
What impact will information technology have
on the annual reporting process? Perhaps
financial reporting in the 1990s will be
accomplished electronically. The SEC’s long-
awaited and, at times, controversial EDGAR
(electronic data gathering, analysis and
retrieval) project appears to be moving along
with sufficient speed to be fully operational
Chapter 12 / Corporate Reporting on the Internet
in the 1990s. The OSC is planning to provide
a similar service. The Canadian Financial
Database is an example of the filing of
financial information with a database; in fact,
it uses the annual reports of public companies
for input.
As companies move on-line with electronic
filing capabilities and information is
continuously available, there may be little
need for an annual report to be published.
Still, there is widespread agreement that, for
the foreseeable future, the primary report
submitted annually to shareholders will be a
printed document. Indeed, given the enormous
capacity of computers to produce and store
information, the need for the annual report
may be even greater in the electronic age.
While the electronic transmission of
information may make the analyst’s job easier
and more productive through quick access
and retrieval, the printed annual report
will still have tremendous value. There is a
lot of image information in annual reports
conveyed through elements like graphics
and photography which management uses to
differentiate themselves from the competition.
Experimental and novel approaches will
surface from time to time, but analysts and
investors are accustomed to receiving and
reviewing traditional annual reports. Such an
entrenched reporting format is unlikely to be
replaced because it remains a familiar and
cost-effective way of disseminating corporate
information to a wide audience at a point in
time.
In 1999, the International Accounting
Standards Committee (IASC) issued the
discussion paper Business Reporting on
the Internet as the first step in a possible
project to develop standards in that area. 5 It
examined:
• the current technologies available for
electronic business reporting;
• what companies around the world are
actually doing (this involved a detailed
analysis of the websites of the 30 largest
companies in each of 22 countries, 660
companies in all);
• standards for electronic business
reporting, within the constraints of
technology;
• the shortcomings of business reporting on
the Internet within current technologies;
and
• the technological changes on the
horizon and how they can improve
electronic business reporting (particularly
downloading and analysis of financial
data).
Among other recommendations, the paper
urged the IASC to adopt a Code of Conduct
for web-based business reporting. It also
recommended the IASC join a consortium
effort — which would include information
intermediaries, software companies, securities
regulators, national accounting standard
setters, international accounting firms and
others — to develop a global electronic
business reporting language to meet the
needs of investors, lenders, regulators and
others who look to the Internet for financial
and operating information about business
enterprises.
Also in 1999, the CICA published the
Research Study The Impact of Technology
on Financial and Business Reporting.6 That
study reviewed the pertinent literature and
surveyed 370 companies, drawn from the
approximately 10,000 companies listed on
the New York Stock Exchange, NASDAQ and
the Toronto Stock Exchange, to provide an
overview of how much the Internet was being
used for financial reporting in North America.
The survey, along with others undertaken in
the US and Europe, indicated that there was a
relatively high, and increasing, level of usage
of the Internet for presenting financial data.
In 2000, the US Financial Accounting
Standards Board (FASB) issued a report on
Electronic Distribution of Business Reporting
Information as part of its Business Reporting
Research Project (BRRP). The report
examined the kind of business information
corporations were reporting outside of
financial statements.7
In 2002, the International Federation of
Accountants (IFAC), together with the IASC
and in consultation with interested parties,
issued Financial Reporting on the Internet.
The purpose was to stimulate discussion
of issues facing organizations opting to
communicate financial information on their
corporate websites. The paper states “Those
who have responsibilities in the traditional
environment have similar responsibilities
when the information is also communicated
by the Internet, and ultimately the interest is
the same — to ensure high-quality, transparent
financial reporting on the Internet, or
otherwise.”8
In 2003, the Toronto Stock Exchange
(TSX) updated Electronic Communications
Disclosure Guidelines. That publication
strongly recommends that all listed issuers
maintain a corporate website to make
investor relations information available
electronically. It also maintains that Internet
disclosure alone will not meet issuers’
disclosure requirements and that they
must continue to use traditional methods
of dissemination. The overall objective of
the guidelines is to encourage the use of
electronic media to make investor information
accessible, accurate and timely. The challenge
of regulating electronic media is to ensure
that regulatory concerns are addressed
without impeding innovation.9
In addition to the above-noted landmark
publications issued by various standard-
setting bodies and stock exchanges, the
Corporate Reporting to Stakeholders
current literature includes a growing body of
academic research that examines corporate
reporting on the Internet.10
SURVEYING CORPORATE
WEBSITES
CICA Corporate Reporting Awards 2007
(CRA) looks at “Excellence in Electronic
Disclosure for TSX-listed Companies,” 11
recommending evaluation criteria addressing
the content, navigation and usability of
investor relations (IR) sections of company
websites. The criteria focus on whether the IR
home page:
• has a proper “meta page title,” which
includes the name of the company
followed by the words “investor relations”
(important for book marking);
• immediately addresses visitors’ primary
needs (for example, find specific
information, introduce the company,
provide updates);
• contains a clearly marked section that
describes the company and outlines its
investment proposition.
Survey of Information Content
With the CRA evaluation criteria in mind, the
Study Group commissioned a comprehensive
survey of the information content of certain
Canadian company websites early in 2007.
The survey examined the information content,
Chapter 12 / Corporate Reporting on the Internet
navigation and the use of technology on the
websites of 125 companies that participated
in the CICA Corporate Reporting Awards
program for the 2005 or 2006 competitions.
It also analyzed whether essential information
was made available to investors and
other stakeholders and assessed how well
technology was being used to enhance
communications. Appendix A contains an
alphabetical list of the survey companies,
along with the website address (URL) for
each company.
Each website was analyzed three times
for the survey. Starting with the company
sitemaps (website architecture), the first step
was to create an inventory of the information
items companies provided and to categorize
that information. About one-quarter of the
survey companies did not provide a sitemap.
Therefore, the second step was to analyze
each company’s home page as a proxy for
the sitemap. The third step was to determine
where the information items were located — in
the investor relations section or elsewhere on
the website.
Almost 5,000 information items were
identified, with 2,000 located in the investor
relations section and 3,000 elsewhere. On
average, there were 42 items per company,
ranging from 34 to 56 depending on the
industry.
The categories of information and the items
classified under each category are set out
in Appendix D, together with some general
observations on the survey findings. The
10 main categories of information and the
percentage of companies reporting such
information are:
• communication (100%);
• investor relations (99%);
• financial (96%);
• management (94%);
• governance (84%);
• human resources (78%);
• social responsibility (63%);
• marketing (62%);
• production (43%);
• miscellaneous (42%).
Analysis of Essential Information
After taking inventory and completing a
general analysis of the information content
on the websites surveyed, the Study Group
decided to focus its attention on the
investor relations webpages.12 It decided to
assess whether those pages were disclosing
essential information to investors and
other stakeholders. Using the previously
identified essential information items (see
Chapters 5 to 9), it carried out an in-depth
analysis of company websites and, at the
same time, noted the ease or difficulty of
finding the information. In the Study Group’s
view, if a website user is unable to find
the information quickly — within a couple
of clicks — communication efforts will be
ineffective.
For each of the 24 types of essential
information listed in Exhibit 12.3, the number
of clicks to find it was recorded. This
provided a proxy measure of the ease of
website navigation. Counting the number of
clicks stopped when the link to the annual
report was reached, since it was assumed
that most of the essential information would
be found there.
Exhibit 12.3 presents the results of the analysis.
It lists the 24 essential information items, the
number of companies (if any) providing them,
the percentage of companies providing each
item and the minimum/maximum number of
clicks needed to locate the item:
• 88 companies (78%) disclosed the
corporate mission;
• 75 companies (66%) presented some
information about products, services and
markets;
• 18 companies (16%) included a president/
CEO letter or short message;
• 24 companies (21%) provided an overall
review of operations;
• 108 companies (96%) provided links to the
financial statements and auditors report;
• 111 companies (98%) disclosed information
about share data;
• 93 companies (82%) provided navigation
links, usually located at the left of the
screen;
• 36 companies (32%) included a corporate
directory.
Corporate Reporting to Stakeholders
Exhibit 12.3
ESSENTIAL INFORMATION
# of # of Clicks
Companies % (min/max)

A Corporate Overview       

2 Corporate mission 88 78% 1/5

 
3 Products/services/markets 75 66% 2/5
 
4 Company ownership and control 3 3% 3/4
 
  9 President/CEO Letter 18 16% 1/4
  11 Outlook 4 4% 2/5

C Review of Operations     

1 Overall review and interpretation 24 21% 2/4

  2 Segment review of operations 5 4% 2/4

  5 Response to change 0 0%
 
6 Forward-looking information 2 2% 2/3
 
7 Risks and uncertainties 0 0%
 
  8 Financial and operating objectives 8 7% 3/5

  9 Performance compared to objectives 5 4% 4/4

D Financial Summary and Analysis     

1 Analysis of operating results 4 4% 3/4

2 Segment analysis 0 0%  

  3 Analysis of financial position 2 2% 3/3

  5 Analysis of cash flows 1 1% 4/4
  6 Liquidity 10 9% 3/5
 
Accounting policy changes not yet
  8 implemented 0 0%  
 
9 Statement of management’s responsibility 0 0%  
 
10 Financial statements/auditor’s report 108 96% 2/6
 
  12 Performance measures 59 52% 2/5

  13 Share data 111 98% 2/4

E Supplemental Information

  1 Table of contents/navigation 93 82%  

  3 Corporate directory 36 32% 2/3

Chapter 12 / Corporate Reporting on the Internet

In summary, only eight of the 24 essential
information items were provided by more
than 10% of the survey companies. Five
essential information items were not found
at all — response to change, risks and
uncertainties, segment analysis, accounting
policy changes not yet implemented and
statement of management’s responsibility.
Very few provided the other 11 essential
information items.
The most important survey conclusion is that,
in general, companies are not using their
investor relations webpages as a distinct
communication medium (compared to the
annual report) to convey essential information
to investors and other stakeholders. This
section of corporate websites seems to serve
only as a library to store company reports.
Use of Technology
As part of the survey, the Study Group
evaluated the use of technology to
communicate with investors and other
stakeholders. The survey showed that:
• 63% of the companies provided links to
investor presentations (for example, in
PowerPoint format, PDF format, video,
etc.);
• 44% used webcasts to present the
president’s message or to provide links
to the CFO or CEO presentations or
conferences;
• 43% utilized a “document request” feature
where users can give their mailing and
e-mail addresses;
• 22% provided the capability for generating
up-to-date graphics of share data (10%
had links to pop-up graphics);
• 21% provided a link for users to give their
e-mail address for receiving e-mail alerts;
• 18% provided an e-mail subscription
feature for the latest news and reports;
• 13% provided information in videos,
photos, MP3, podcasts and interactive
graphics;
As noted above, most survey companies
put their financial statements and auditors’
report on their investor relations webpages
via a link to a PDF or HTML document
containing all or part of the full annual report.
A few companies provided the information
elsewhere on their websites. Exhibit 12.4
shows how technology provided the different
annual report formats.
Exhibit 12.4 shows that 96% of the companies
posted their annual reports in PDF format:
• 43 companies (38%) had a table of
contents with hyperlinks corresponding to
the sections of the annual report. Users of
the annual reports of the other 62% would
have to click and flip through the entire
report to find the information they were
looking for. Clearly, companies are not
using Acrobat technology features to help
users navigate.
• One company used Acrobat technology
features (hyperlinks) to help users
navigate within its annual report PDF
document but the hyperlinks did not
help them find other information located
elsewhere on the website.
Corporate Reporting to Stakeholders
Exhibit 12.4
ESSENTIAL INFORMATION
AND THE USE OF TECHNOLOGY
# of %
Companies of 113
Financial Summary and Analysis
  Annual Reports 108 96%

      HTML 36 32%

      Navigable within and without 2 2%

      Navigable within only  30 27%

          Largely navigable 14 12%

 
        Links to MD&A PDF documents  13 12%
 
        Links to PDFs (full report and parts)  18 16%

        Links to Excel files  8 7%

        Table of content links  25 22%

 
      Annual report replication  30 27%
 
      Long HTML webpages  23 20%
 
        Integrated features  9 8%

        Search tool  10 9%

      PDF 108 96%

      Animated 1 1%
 
        Table of contents with links  43 38%

        Hyperlinks (within document)  1 1%

Exhibit 12.4 shows that 32% of companies
posted their annual reports in HTML format:
• 25 of the 36 companies had a table
of contents with hyperlinks to specific
information;
• 14 companies provided links for navigating
within the HTML report to make it more
interesting to use and facilitate quick
access to any information sought;
• 13 companies provided several links within
the HTML annual report to PDFs of the
MD&A and Financial Statements (in full several times to find the information they are
or in parts).
• 10 companies provided a search feature to
find information quickly;
• 9 companies integrated novel features in
their online report (for example, pop-up
graphics, pop-up glossary, pop-up
definitions or computation of a ratio and
animation);
• 2 companies added links to information
outside of the company webpages (for
example, to SEDAR).
In summary, the survey showed that most of
the HTML reports are simply a replication of
the paper annual report. The HTML pages are
long and users have to scroll up and down
looking for. Overall, the use of technology
to communicate with investors and other
stakeholders is still at an embryonic stage.
Further research and guidance is needed to
address the challenges.

Chapter 12 / Corporate Reporting on the Internet

FACING THE CHALLENGES
As previously mentioned, companies are
not using the investor relations webpages
as a distinct communication medium.
Investor relations is the field of corporate
communications specializing in information
and disclosure management for public and
private companies as they communicate with
the investment community at large. Many
larger publicly-traded companies now have
dedicated IR officers, who oversee many
aspects of shareholder meetings, press
conferences, one-on-one briefings, investor
relations sections of company websites, and
company annual reports.13
With respect to “Excellence in Electronic
Disclosure for TSX-listed Companies,” the
CICA Corporate Reporting Awards 2007
evaluation criteria encompassed “Overall
Effectiveness and Best Practices.” It notes
that excellent electronic disclosure involves
making the best use of technology to
make the most relevant information readily
available to users.14
To be effective, a website must be treated as
a communications vehicle in its own right. It
is not merely an Internet bulletin board. The
information content and readability should be
integrated with technology, not overwhelmed
by it. That requires the appropriate use of
multimedia, photographs, tables, charts and
graphics.
The Study Group discussed the future of
online annual reporting, the information
content that corporate websites should
contain and how companies could make
better use of existing and emerging
technologies to enhance corporate
communications with investors and other
stakeholders.
Future of the Online Annual Report
The Study Group proposed, in Chapter 11,
that investors and other stakeholders receive
a clear, concise summary annual report
containing the key information needed to
make informed investment decisions. It also
proposed that companies be encouraged
to take advantage of technological
developments to provide information that
is easier to use and more readily accessible,
while retaining the comprehensive quality
available today. In other words, companies
should harness the power of the Internet
to allow investors to efficiently access the
particular information they are interested in
and to choose the format for receiving more
detailed information.
For the foreseeable future, it is apparent
that the online annual report will continue to
be driven by its offline annual counterpart,
including the legal and regulatory
requirements companies must consider
when presenting the information.15 Given the
trend toward greater narrative reporting,
companies will need to look more critically
at non-financial information and provide a
clearer indication of aims, objectives, strategy
and key performance indicators.
In the National Investor Relations Institute
(NIRI) 2006 Survey Results on Annual Report
Trends and Practices, respondents stated that
an online annual report (see Exhibit 12.5):16
• is formatted in PDF version (89%) or as an
interactive HTML (65%);
• features an index (34%), photographs
(51%) and illustrations (25%);
• includes downloadable financial data for
use in a spreadsheet (22%).
Corporate Reporting to Stakeholders
Exhibit 12.5
AR Trends 2007 (page 3) selected 130
Canadian and 76 US reports to collect data
on 106 items and characteristics that define
an annual report. The goal was to explore
how companies use traditional annual reports
to inform and engage investors as effectively
as possible. Exhibit 12.6 shows that, although
HTML is a more powerful format for the web,
more companies are using only PDF for their
online reporting.
Chapter 12 / Corporate Reporting on the Internet
Exhibit 12.6
AR Trends 2007 also notes (pages 50-53)
that:
• “Some companies direct readers to
their website for additional commentary
through their printed report. The print
and Web version of the annual report
should work in tandem to strengthen its
usefulness to investors.”
• “A good investor relations website is not
simply a bulletin board for the company’s
print documents. It provides context
and supplementary data while making
full use of the Internet’s capabilities for
interactivity, including the ability to be
constantly updated.”
Online annual reports have evolved in various
ways:
• The printed annual report is designed and
produced, then converted into an online
version.
• The print and online versions are
developed simultaneously to maximize the
web’s interactive and media capabilities.
• The online version is the priority and the
print is a hard copy of the online version.
• The online version replaces the printed
annual report entirely.
If the printed annual report becomes extinct,
what form will the online annual report take?17
In the Study Group’s view, possible scenarios
include the following:
• multimedia content, dynamic and
interactive charts, video, animated
graphics and audio;
• viewable on handheld devices;18
• downloadable as Webcasts and Podcasts
available as RSS alerts.
In summary, the online annual report should
address the following key questions:
1. Can visitors find the online annual report
quickly and easily from the company
home page?
2. Are a sitemap and a search feature
available?
3. Does the website allow visitors to
choose how they receive more detailed
information?
Website Information Content
Current best practice now considers websites
as the primary and definitive means of
communicating information about a company.
Ultimately, the usefulness of corporate
websites is determined by their content, which
should be unambiguous, timely and relevant
to investors and other stakeholders.
In the Study Group’s view, website content
should include financial and non-financial
information (where possible, allowing for Excel
downloads). It should distinguish between
current and historical information and be kept
up to date, with a clear indication as to when
information has been posted. Information
that is no longer current should be archived
but remain accessible. Exhibit 12.7 highlights
best practices for making current and archival
materials available on company websites.
Exhibit 12.7
BEST PRACTICES — CURRENT
AND ARCHIVAL MATERIALS
• the most recent annual report (clearly
distinguishing audited and unaudited
information);
• the most recent interim report (clearly
distinguishing audited and unaudited
information);
• current year financial highlights and
summaries, including key performance
measures;
• any significant regulatory or legislative
developments that may affect the company;
• current share price, updated regularly;
• a calendar to inform website visitors of
upcoming events;
• an e-mail alert capability to which visitors can
subscribe, if they choose;
• Webcasts/transcripts of presentations;
• 5 to 10 years of archived financial reports;
• share price and market capitalization
histories;
• memorandum and articles of association;
• an archive of press releases.
Maintaining website content is usually
the responsibility of the investor relations
function. It often includes the transmission
of information on intangible values, such as
company policy on corporate governance or
social responsibility. Recently, there has been
Corporate Reporting to Stakeholders
an increasingly popular movement toward
“interactive data” and the management of
company filings through streaming-data
solutions such as XBRL or other forms of
electronic disclosure.19
Corporate Governance Data
The corporate website is an ideal location for
information about how a company is managed
on behalf of its shareholders. As is the case for
important financial information, the principles
of corporate governance that underpin
management should not be buried in an
annual report. Corporate governance remains
a very important area to report. Although
some companies only list their directors and
senior management, the best sites include
comprehensive details of the governance
structure, including committees, policies, terms
of reference and recent activities — generally a
comprehensive treatment of the governance
approach in place.
CICA Corporate Reporting Awards 2007
evaluation criteria for excellence in corporate
governance disclosure included reviewing
the proxy circular and how a company uses
technology to report this information. 20
Company disclosures must clearly and
comprehensively deal with items such as:
• overall approach to corporate governance;
• the mandate of the board of directors,
including duties and objectives;
• board committees, their mandates and
activities;
• description of the procedures and
processes used in recruiting new directors
and assessing board performance;
• information on the nominating committee;
• classification of decisions requiring prior
board approval.
Company disclosures must also deal with:
• the board’s expectations of management;
Chapter 12 / Corporate Reporting on the Internet
• board size, composition and whether the
board has a majority of unrelated directors,
including the basis for this analysis;
• board composition and whether it fairly
reflects the investment of minority
shareholders (in cases where a company
has a significant shareholder), including
the basis for this analysis;
• discussion and description of the
structures and processes in place to
facilitate the functioning of the board
independently of management, when the
board does not have a chair separate from
the CEO;
• review of measures for oversight of
external communications, receiving
shareholder feedback and dealing with
shareholder concerns;
• board and executive compensation
disclosure.
Corporate Social Responsibility Data
Reporting on corporate social responsibility
(often called sustainability reporting) is
becoming a significant global issue. What
was once a peripheral aspect of corporate
reporting is now moving into the mainstream
accounting and reporting systems. This is
happening at a time when the accounting
profession is moving from its traditional stance
of measuring only financial figures to one
that recognizes “intangible” items that can
have a considerable impact on a company’s
strategy and performance. The financial and
economic data needs to be merged with social
and environmental information to enable
management to see strategic impacts and
possibilities as a whole. 21
CICA Corporate Reporting Awards 2007
evaluation criteria for excellence in sustainable
development reporting, which encompass
how technology is used to report this
information, included:22
• key industry and company issues such as:
understanding of business context and
challenges; clear identification of key risks;
discussion of key industry and company
sustainability issues; and discussion of how
key risks and issues are being addressed;
• context and company profile such as:
description of company; discussion of key
business information (for example, number
of employees); presentation of ownership
structure; description of company’s
vision and strategy for sustainability; how
sustainability strategy is incorporated
into corporate strategy; and discussion
of scope of report (for example,
environmental, health and safety, social),
regions covered, and period under review;
The CRA evaluation criteria also included:
• governance structure and management
systems such as: stakeholder engagement;
governance structure; and policies and
management systems;
• performance indicators such as:
○○ direct economic impacts (includes
data reported and context provided for
Exhibit 12.8
capital investments, R&D investments
and taxes);
○○ environment (includes data
reported and context provided for
water conservation/management,
eco-efficiency/materials management,
waste management, pollution
abatement/emissions management
and energy used);
○○ labour practices (includes data
reported and context provided for
labour practices/management/labour
relations; employee health and safety);
○○ human rights; society (includes data
reported and context provided for
community relations/engagement;
discussion of political contributions);
○○ product responsibility/supply chain
policies and practices; and
○○ discussion of regulatory compliance.
As shown in Exhibit 12.8, AR Trends 2007
notes (page 50) that: “Sustainability and
corporate responsibility tend to be web-only
discussions, although more companies are
producing printed CSR reports as well.”
Corporate Reporting to Stakeholders
XBRL (eXtensible Business
Reporting Language)
A new technology that companies should
embrace is XBRL or “Interactive Data” useful
for presenting financial information. 23 It is
growing rapidly around the world and is set
to become the standard way of recording,
storing and transmitting business financial
information.
XBRL Canada has made significant progress
in furthering the adoption of XBRL by
Canadian companies and promoting the
benefits of its use. 24 In 2007, it supported
the launch of the Voluntary Filing Program
by the Canadian Securities Administrators. 25
It also received acknowledgment by XBRL
International of the updated version of
the Canadian GAAP PFS Taxonomy and
sponsored the 16th XBRL International
Conference in December 2007. 26
The US Securities and Exchange Commission
is leading a global move to interactive
financial reporting. 27 It has announced
the creation of a new office to lead the
transformation to interactive financial
reporting by public companies. There are
clear indications that it may be required in
the near future. Therefore, companies should
begin using it, both for filing with regulators
and for disclosure on websites.
Effective Use of Technology
A major advantage of web-based corporate
reporting is that the communication
possibilities go far beyond that achievable
by traditional means. Technology and
interactivity can be used to engage investors
and enhance their experience (for example,
with Flash movies, videos of interviews with
senior management, financial information
downloads, charting tools and feedback
forms). Technology can also be used to
design a website that allows equal access
to information and services to all users,
Chapter 12 / Corporate Reporting on the Internet
including those with visual, hearing, cognitive
and motor impairments. It should enable
users to control a number of features
including the size of the text, layout and
navigation.
In the Study Group’s view, Exhibit 12.9
highlights best practices for easing
navigation on company websites. Navigation
should be intuitive. As a start, the investor
relations homepage should be only one click
away from the company homepage. A clear
and comprehensive sitemap and a site search
feature should be available, along with a help
button for those with difficulty finding what
they want. By using navigation tracking and
different colours for visited and unvisited
links, visitors can reference their current
position on a website and retrace their steps.
An important aspect of navigation is
download time, which means smaller rather
than larger PDF files or re-sizing large
files into several smaller files. The type of
file should be listed, along with its size. In
addition, links to third-party sites can provide
a wider context for information. Relevant
links to industry bodies, regulators or trading
partners help keep visitors current with news
about the industry and overall economy. It
is essential, however, to provide appropriate
legal disclaimers, such as a warning screen,
when users leave the company website.
Exhibit 12.9
BEST PRACTICES — NAVIGATION
• The investor relations webpage should be
readily accessible.
• A site map and a search facility should be
available.
• Navigation tracking should be provided.
• File download times should be minimized.
• Links should indicate if they are internal to
the company website or lead to third-party
sites.
In summary, no single Canadian company
included in the website survey met all
of the CRA criteria for 2007. Many have
room for improvement. Therefore, the best
practices criteria provide a useful foundation
for improving company websites and, in
particular, investor relations webpages. 28
Examples of leading-edge companies
implementing best practices (such as Nexen
Inc., Potash Corporation of Saskatchewan Inc.,
TELUS Corporation, BCE Inc., The Thomson
Corporation, Bank of Montreal, MDS Inc.,
Talisman Energy Inc. and Petro-Canada) may
be a source of guidance for all organizations
seeking to enhance online communications
with investors and other stakeholders.
CONCLUSION
According to the CICA Corporate Reporting
Awards, companies, investors and other
stakeholders are now shifting their focus
to the Internet as the primary medium for
corporate financial and business information.
The Study Group, therefore, decided to review
the pertinent literature in this area, survey the
information content of corporate websites and
discuss the challenges resulting from the rapid
advancement of information technology.
As part of the literature review, the Study
Group considered landmark publications
issued by various standard-setting bodies
and stock exchanges. It noted that the
current literature includes a growing body of
academic research that examines corporate
reporting on the Internet.
With the CRA evaluation criteria in mind,
the Study Group then undertook a survey
of corporate reporting on the Internet. It
identified the general information content of
company websites, analyzed whether essential
information is made available and assessed
how well technology was used to enhance
communications.
The most important observation from this
survey is that, in general, companies are not
using their investor relations webpages as a
distinct communication medium (compared
to the annual report) to convey essential
information. Furthermore, it is apparent that
the use of technology to communicate with
investors and other stakeholders is still at an
embryonic stage.
The Study Group discussed the future of
the online annual report and the information
content that corporate websites should
contain. It also considered how companies
could make better use of existing and
emerging technologies to enhance corporate
communications as they shift to a new
paradigm — real-time online reporting. This
area merits further study.
Corporate Reporting to Stakeholders
 Notes
1. The quote is from the CICA Corporate Reporting
Awards 2007 judges comments booklet reference materials were reviewed:
(page 49), available on the CICA website • Peter Oyelere, Fawzi Laswad and Richard
(http://www.cica.ca/1/3/1/index1.shtml).
2. Useful insight is provided in Best
Practices for Corporate Blogs (London:
PricewaterhouseCoopers LLP, 2006) (available
at www.globalbestpractices.com).
3. CICA Corporate Reporting Awards 2007 judges
comments booklet (page 46), available on the
CICA website (http://www.cica.ca/1/3/1/index1.
shtml).
4. Canadian Shareowners Study (Toronto: TSX
Group, July 2004), pp. 81-82. The July 2002
version of the Canadian Shareowners survey is
available on the Internet (http://www.world-
exchanges.org/publications/TSX%20Group%20
2002.pdf).
5. Andrew Lymer, Roger Debreceny, Glen Gray
and Asheq Rahman, Business Reporting on
the Internet (London: International Accounting
Standards Committee, 1999). Paul Pacter,
Technical Director in the Deloitte Touche
Tohmatsu’s Hong Kong office, was the project
manager.
6. G.D. Trites, The Impact of Technology on
Financial and Business Reporting (Toronto:
Canadian Institute of Chartered Accountants,
1999), available online (http://www.cica.
ca/1/0/0/2/index1.shtml).
7. Electronic Distribution of Business Reporting
Information, Business Reporting Research
Project (Norwalk, CT: Financial Accounting
Standard Board, January 2000), available online
(http://72.3.243.42/brrp/brrp_main.shtml).
8. Financial Reporting on the Internet (New
York: IFAC, August 2002), available online
(http://www.ifac.org/Members/DownLoads/
FinancialReportingInternet.doc).
9. Electronic Communications Disclosure Guidelines
(Toronto: TSX, 2003), available online (http://
www.tsx.com/en/pdf/ElectronicCommunications.
pdf).
Chapter 12 / Corporate Reporting on the Internet
10. For purposes of this study, the following selected
Fisher, “Determinants of Internet Financial
Reporting by New Zealand Companies,”
Journal of International Financial Management
and Accounting, 14:1 (2003).
• Alfred Wagenhofer, “Economic Consequences
of Internet Financial Reporting,”
Schmalenbach Business Review (October
2003).
• Samir Trabelsi, Réal Labelle and Claude
Laurin, “The Management of Financial
Disclosure on Corporate Websites: A
Conceptual Model,” Canadian Accounting
Perspectives, 3, 2 (2004), pp. 235-259.
• Howard Davey and Kanya Homkajohn,
“Corporate Internet Reporting: An Asian
Example,” Problems and Perspectives in
Management (February 2004).
• Michael J. Jones and Jason Z. Xiao, “Financial
Reporting on the Internet by 2010: a
consensus view,” Accounting Forum 28
(2004), pp. 237-263.
• Barry Smith and Denise Peppard, “Internet
Financial Reporting: Benchmarking Irish PLCs
against best practice,” Accountancy Ireland
(December 2005), pp. 22-24.
• Shrikant Sortur, “Financial Reporting on
Internet,” The Chartered Accountant (January
2006), available online (http://www.icai.
org/icairoot/publications/complimentary/
cajournal_jan06/996-1006.pdf).
• Kshama V. Kaushik and Kaushik Dutta,
“Corporate Reporting — Without Shades of
Grey,” The Chartered Accountant (January
2006), pp. 975-982.
• William M. Sinnett, “A Revolution in Corporate
Reporting?,” Financial Executive (January/
February 2006), pp. 40-42.
• Sylvie Héroux, “Website Content Management
and Analysis: A Stakeholder and Contingency
Perspective,” working paper (July 2006).
• Trevor Pyman “Brave New World,” Charter
(August 2007), pp. 28-30.
11. Information about the CICA Corporate Reporting
Awards judging criteria is on the CICA website
(http://www.cica.ca/1/3/1/index1.shtml).
12. The CICA corporate website analysis was
completed near the end of 2007. At that time,
10 of the survey companies had been sold and,
despite repeated attempts to access them, two
company websites would not function. That left
113 companies in 12 industry categories to be
analyzed.
13. This description of “investors relations” is
from Wikipedia (http://en.wikipedia.org/wiki/
Investor_relations).
14. Information about the CICA Corporate Reporting
Awards judging criteria is on the CICA website
(http://www.cica.ca/1/3/1/index1.shtml).
15. Online Reporting: Practical Proposals for
Reporting Corporate Performance Online was
published in December 2007 by the Report
Leadership Group (www.reportleadership.com). Awards judging criteria is on the CICA website
It notes that “Several factors are coming
together to create a pull for more — and
better — online reporting. Companies and
investors both see websites as an increasingly
useful channel for communicating information.
And changing legislation is creating new
opportunities. In the UK and US, for example,
companies can now use the internet as their
default medium for reporting. US regulations
now positively encourage reporting in formats
such as HTML, which favours interactivity, rather
than simply providing PDFs of the printed report
pages.”
16. As reported at the NIRI e-Learning Forum on
September 26, 2006.
17. According to a July 2007 media release by
the Australasian Investor Relations Association
(AIRA), 71% of respondents said they do not
choose to receive hard copy annual reports
currently, and 79% of respondents said it was
not important for them to receive a hard copy
annual report as long as the information is
available on the company’s website. The catalyst
for AIRA’s research is new legislation that will
likely see electronic communication become,
over time, the primary vehicle through which
listed companies engage with their shareholders.
The new law requires shareholders to proactively
“opt-in” to receive a hard copy annual report
and other shareholder documents when the
information is provided on a listed company’s
website. The AIRA was established in 2001 to
advance the awareness of and best practice in
investor relations in Australia and New Zealand
and thereby improve the relationship between
listed entities and the investment community.
18. As mobile devices increase in usage, it is likely
that more focus will be devoted to providing
information in a format suitable for PDAs.
19. This description of “investors relations” is
from Wikipedia (http://en.wikipedia.org/wiki/
Investor_relations).
20. Information about the CICA Corporate Reporting
Awards judging criteria is on the CICA website
(http://www.cica.ca/1/3/1/index1.shtml).
21. These matters are discussed in the Financial
Times article “Clean reports add value,”
available online (http://www.wbcsd.org/plugins/
DocSearch/details.asp?type=DocDet&ObjectId=
MjYyMTk).
22. Information about the CICA Corporate Reporting
(http://www.cica.ca/1/3/1/index1.shtml).
23. Interactive Data - Building XBRL into Accounting
Information Systems (Toronto: CICA, 2007). This
Research Study explores the implementation and
business process implications of tagging XBRL at
different levels in an organization’s information
infrastructure. It explains in non-technical terms
what XBRL is, the growing usage of XBRL,
how it is being applied, for what purposes and
the business case for adopting XBRL. Further
information is available online (http://www.cica.
ca/index.cfm/ci_id/27401/la_id/1.htm).
24. The role of XBRL Canada, a not-for-profit
consortium of leading Canadian companies
and organizations, is to create and maintain
XBRL taxonomies based on Canadian reporting
standards, to increase the awareness, knowledge
and understanding of XBRL and its uses in
Canada and to stimulate and promote the
adoption of XBRL in Canada (see http://www.
xbrl.ca and http://www.zorba.ca/xbrlblog.html).
25. On January 19, 2007, the Canadian Securities
Administrators (CSA) launched an XBRL
voluntary filing program. Since May 2007,
reporting issuers participating in the voluntary
program have been able to file financial
statements in XBRL format on SEDAR (refer to
http://www.xbrl.ca/e/CSAVP.html and http://
www.sedar.com/issuers/issuers_en.htm).
26. For information, refer to the XBRL International
website (http://www.xbrl.org) and the 16th XBRL
International Conference website
(http://conference.xbrl.org).
27. Additional information is available on the SEC
website at “Spotlight On: Interactive Data and
XBRL Initiatives” (http://www.sec.gov/spotlight/
xbrl.shtml).
28. Insight on website best practices is also
provided by the UK Investor Relations Society
(http://www.ir-soc.org.uk/index.asp?pageid=10).
Corporate Reporting to Stakeholders
 Appendix A
List of Survey
Companies
This appendix presents
an alphabetical list of the
survey companies, along
with the website address
(URL) for each company,
classified by industry
sector. A summary of the
survey results — by category
of information and by
industry classification — is
provided in Appendix B.
The survey undertaken for this Research Study covered the
2004 and 2005 annual reports of all companies participating
in the CICA Corporate Reporting Awards program.1 Participants
are from the top 50 companies per industry sector with
a market cap of over $200 million, listed on the TSX and
incorporated in Canada. Small cap and venture companies in
the top 50 TSX companies with under $200 million in market
capitalization, as well as the top 50 TSX Venture companies
are also eligible to participate. In all, a total of 125 companies
participated in the 2005 or 2006 competitions.
1. Aline Girard, PhD, CA, Associate Professor at HEC Montreal, carried out
the corporate annual report survey on behalf of the Study Group.
Corporate Reporting to Stakeholders
 No. Industry / Company  Website URL
  Communications and Media
1 Aliant Inc.
2 BCE Inc.
3 Canwest Global Communications Corp.
4 Rogers Communications Inc.
5 TELUS Corporation
6 Thomson Corporation (The)
7 Transcontinental Inc.
  Consumer Discretionary
1 Canadian Tire Corporation Limited
2 Empire Company Limited
3 Fairmont Hotels & Resorts Inc.
4 Four Seasons Hotels Inc.
5 George Weston Limited
6 Gildan Activewear Inc.
7 Hudson’s Bay Company
8 Loblaw Companies Limited
9 Saputo Inc.
10 Sobeys Inc.
  Diversified Industries
1 Agrium Inc.
2 Alcan Inc.
3 Bombardier Inc.
4 Brascan Financial Corporation
5 CCS Income Trust
6 Clearwater Seafoods Income Fund
7 DALSA Corporation
8 DOFASCO INC.
9 IPSCO Inc.
10 Methanex Corporation
11 North West Company Fund
12 NOVA Chemicals Corporation
13 ONEX CORPORATION
14 Russel Metals Inc.
15 Toromont Industries Ltd.
16 ZENON Environmental Inc.
Appendix A / List of Survey Companies
Not available
http://www.bce.ca
http://www.canwestglobal.com
http://www.shoprogers.com
http://about.telus.com
http://www.thomson.com
http://www.transcontinental.com
http://www2.canadiantire.ca
http://www.empireco.ca
http://www.fairmont.com
http://www.fourseasons.com
http://www.weston.ca
http://gildan.com
Not available
http://www.loblaw.ca
http://www.saputo.com
http://www.sobeys.com
http://www.agrium.com
http://www.alcan.com
http://www.bombardier.com
Not available
http://www.ccsincometrust.com
http://www.clearwater.ca
http://www.dalsa.com
http://www.dofasco.ca
http://www.ipsco.com
http://www.methanex.com
http://www.northwest.ca
http://www.novachem.com
http://www.onex.com
http://www.russelmetals.com
http://www.toromont.com
http://www.zenon.com
No. Industry / Company  Website URL
  Financial Services
1 Bank of Montreal
2 Bank of Nova Scotia (The)
3 Brookfield Asset Management Inc.
4 Canaccord Capital Inc.
5 Canadian Imperial Bank of Commerce
6 Canadian Western Bank
7 ING Canada Inc.
8 Kingsway Financial Services Inc.
9 National Bank of Canada
10 Power Corporation of Canada
11 Power Financial Corporation
12 Royal Bank of Canada
13 Toronto Dominion Bank (The)
  Forest Products
1 Abitibi-Consolidated Inc.
2 Cascades Inc.
3 Catalyst Paper Corporation
4 Domtar Inc.
5 Norbord Inc.
6 TimberWest Forest Corp.
  Industrials and Energy
1 AltaGas Income Trust
2 Canadian National Railway Company
3 CP Ships Limited
4 Finning International Inc.
5 Precision Drilling Trust
6 ShawCor Ltd.
7 SNC-Lavalin Group Inc.
8 Stantec Inc.
9 Transat A.T. Inc.
  Life Sciences and Technology
1 Angiotech Pharmaceuticals Inc.
2 Aspreva Pharmaceuticals Corporation
3 Biovail Corporation
4 CAE Inc.
5 CGI Group Inc.
6 CML Healthcare Income Fund
7 Cognos Incorporated
8 MDS Inc.
http://www4.bmo.com
http://www.scotiabank.com
http://www.brookfield.com
http://www.canaccord.com
http://www.cibc.com
http://www.cwbankgroup.com
http://www.ingcanada.com
http://www.kingsway-financial.com
http://www.nbc.ca
http://www.powercorporation.com
http://www.powerfinancial.com
http://www.rbc.com
http://www.td.com
http://www.abitibiconsolidated.com
http://www.cascades.com
http://www.catalystpaper.com
http://www.domtar.com
http://www.norbord.com
http://www.timberwest.com
http://www.altagas.ca
http://www.cn.ca
Not available
http://www.finning.com
http://www.precisiondrilling.com
http://www.shawcor.com
http://www.snc-lavalin.com
http://www.stantec.com
http://www.transat.com
http://www.angiotech.com
http://www.aspreva.com
http://www.biovail.com
http://www.cae.com
http://www.cgi.com
http://www.cmlhealthcare.com
http://www.cognos.com
http://www.mdsintl.com
Corporate Reporting to Stakeholders
 No. Industry / Company  Website URL
  Mining
1 Agnico-Eagles Mines Limited http://www.agnico-eagle.com
2 Barrick Gold Corporation http://www.barrick.com
3 Cambior Inc. http://www.cambior.com
4 Cameco Corporation http://www.cameco.com
5 Centerra Gold Inc. http://www.centerragold.com
6 Goldcorp Inc. http://www.goldcorp.com
7 HudBay Minerals Inc. http://www.hudbayminerals.com
8 Inmet Mining Corporation http://www.inmetmining.com
9 Ivernia Inc. http://www.ivernia.com
10 Placer Dome Inc. Not available
11 Potash Corporation of Saskatchewan Inc. http://www.potashcorp.com
12 Sherritt International Corporation http://www.sherritt.com
13 Teck Cominco Limited http://www.teckcominco.com
14 Yamana Gold Inc. http://www.yamana.com
  Oil and Gas
1 Baytex Energy Trust http://www.baytex.ab.ca
2 Canadian Natural Resources Limited http://www.cnrl.com
3 Canadian Oil Sands Trust http://www.cos-trust.com
4 Compton Petroleum Corporation http://www.comptonpetroleum.com
5 EnCana Corporation http://www.encana.com
6 Enerplus Resources Fund http://www.enerplus.com
7 Freehold Royalty Trust http://www.freeholdtrust.com
8 HUSKY ENERGY INC. http://www.huskyenergy.ca
9 NAL Oil & Gas Trust http://www.nal.ca
10 Nexen Inc. http://www.nexeninc.com
11 Paramount Energy Trust http://www.paramountenergy.com
12 Petro-Canada http://www.petro-canada.ca
13 PROGRESS ENERGY TRUST http://www.progressenergy.com
14 Shell Canada Limited http://www.shell.ca
15 Shiningbank Energy Income Fund http://www.shiningbank.com
16 Suncor Energy Inc. http://www.suncor.com
17 Talisman Energy Inc. http://www.talisman-energy.com

Appendix A / List of Survey Companies

No. Industry / Company  Website URL
  Real Estate
1 Boardwalk Real Estate Investement Trust http://www.boardwalkreit.com
2 Brookfield Properties Corporation http://www.brookfieldproperties.com
Chartwell Seniors Housing Real Estate Investment
3 http://www.chartwellreit.ca
Trust
4 Dundee Real Estate Investment Trust http://www.dundeereit.com
5 First Capital Realty Inc. http://www.firstcapitalrealty.ca
6 Legacy Hotels Real Estate Investment Trust http://www.legacyhotels.ca
7 RIOCAN REAL ESTATE INVESTMENT TRUST https://riocan.com
  Utilities and Pipelines
1 Atlantic Power Corporation http://www.atlanticpowercorporation.com
2 Canadian Hydro Developers, Inc. http://www.canhydro.com
3 Emera Incorporated http://www.emera.com
4 Enbridge Inc. http://www.enbridge.com
5 Enbridge Income Fund http://www.enbridgeincomefund.com
6 Great Lakes Hydro Income Fund http://www.greatlakeshydro.com
7 Northland Power Income Fund http://www.npifund.com
8 TERASEN INC. Not available
9 TransAlta Corporation http://www.transalta.com
10 TransCanada Corporation http://www.transcanada.com
  Small Cap/Venture
1 Ascalade Communications Inc. http://www.ascalade.com
2 Carmanah Technologies Corporation http://www.carmanah.com
3 High Liner Foods Incorporated http://www.highlinerfoods.com
4 Matrikon Inc. http://www.matrikon.com
5 Phoenix Technology Income Fund http://www.phoenixcan.com
6 Solana Resources Limited http://www.solanaresources.com
7 Warnex Inc. http://www.warnex.ca
8 Wescast Industries Inc. http://www.wescast.com

Corporate Reporting to Stakeholders

 Appendix B
Annual Report
Survey Results
This appendix presents
a summary of the survey
results by category of
information and by industry
classification.
The background research for this Research Study included
a survey of current reporting practices. The main objective
was to identify instances of disclosure of various types
of information that are not part of the audited financial
statements. In most cases, this called for a subjective
assessment of the information contained in annual reports
because companies seldom reported the information precisely
as defined by the Study Group. Because no attempt was
made to judge the quality of information disclosures, caution
must be exercised when interpreting the results of the
survey. To facilitate understanding of these results, additional
explanations and interpretations are provided in Chapter 4.
For each company, over 50 types of information were
analyzed under the following categories:
A. Corporate Overview — explains what the organization is
all about and the economic environment within which it
operates.
B. Corporate Social Responsibilities — explains how the orga-
nization is meeting its social responsibilities to the public.
C. Review of Operations — discusses what the organization
has done and plans to do and whether it has the necessary
financial and other resources to achieve its goals.
D. Financial Summary and Analysis — depicts where the orga-
nization is now by presenting the financial statements and
the corresponding analysis of operating results, financial
position and cash flows.
E. Supplementary Information — relates to other matters of
interest to investors and other stakeholders.
Corporate Reporting to Stakeholders
F. Form and Presentation — encompasses
pictures, tables, date of issuance, timeli-
ness .and volume of information.
G. Electronic Disclosures — covers links to
company websites, sources of additional
information on financial reporting, gover-
nance and sustainability matters, and links
to regulatory filings.

APPENDIX B Communications and Media

SUMMARY OF SURVEY RESULTS Consumer Discretionary
Diversified Industries
Financial Services
Forest Products
Industrials and Energy
Life Sciences and Technology
Mining
Oil and Gas
Real Estate
Utilities and Pipelines
Small Cap/Venture
Industry Classification
1 2 3 4 5 6 7 8 9 10 11 12 Total %
Number of companies by industry 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
A CORPORATE OVERVIEW
1 Corporate profile 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
2 Corporate mission 7 10 16 12 6 9 7 10 15 7 9 7 115 92%
3 Products/services/markets 7 8 15 13 6 9 7 11 13 6 8 7 110 88%
4 Company ownership and control 3 1 3 6 1 2 0 2 3 3 4 0 28 22%
5 Organizational structure 6 10 13 13 6 9 7 12 12 7 9 6 110 88%
6 Management team 3 5 3 4 2 4 4 3 4 4 2 2 120 96%
7 Management committees 6 10 15 13 5 9 8 14 19 6 9 8 40 32%
8 Comparative financial highlights 7 10 15 13 6 9 7 13 17 7 10 7 121 97%
9 President/CEO letter 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
10 Commentary on industry and economy 7 9 10 13 4 9 5 13 15 2 6 5 98 78%
11 Outlook 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
B CORPORATE SOCIAL RESPONSIBILITIES
1 Human resources 7 10 15 11 6 9 7 13 16 5 7 5 111 89%
2 Social responsibilities 6 8 11 10 6 7 2 13 16 1 7 2 89 71%
3 Environmental responsibilities 3 9 12 8 6 6 0 14 17 3 8 3 89 71%

Appendix B / Annual Report Survey Results

APPENDIX B (cont.) Communications and Media
SUMMARY OF SURVEY RESULTS Consumer Discretionary
Diversified Industries
Financial Services
Forest Products
Industrials and Energy
Life Sciences and Technology
Mining
Oil and Gas
Real Estate
Utilities and Pipelines
Small Cap/Venture
Industry Classification
1 2 3 4 5 6 7 8 9 10 11 12 Total %
Number of companies by industry 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
C REVIEW OF OPERATIONS
1 Overall review and interpretation 7 10 16 12 6 9 8 14 16 7 9 8 122 98%
2 Segment review of operations 7 10 16 13 5 9 5 13 17 7 9 7 118 94%
3 Production information 2 4 9 10 4 6 4 14 17 0 10 5 85 68%
4 Competitive conditions 5 9 13 7 5 7 3 7 9 6 8 4 83 66%
5 Response to change 5 0 0 0 1 3 0 5 0 0 0 1 15 12%
6 Forward-looking information 7 10 16 13 6 9 7 14 17 7 10 8 124 99%
7 Risks and uncertainties 7 10 16 13 6 9 8 14 17 7 10 7 124 99%
8 Financial and operating objectives 4 6 15 13 3 8 0 12 9 6 9 6 91 73%
9 Performance compared to objectives 6 4 3 7 3 5 1 6 6 3 0 2 46 37%
10 Research and development 2 0 7 2 2 1 8 11 10 2 2 7 54 43%
11 Significant agreements and contracts 7 10 16 13 6 8 8 14 15 5 10 7 119 95%
12 Industry specific data 5 8 12 13 3 7 7 12 17 7 10 6 107 86%
D FINANCIAL SUMMARY & ANALYSIS
1 Analysis of operating results 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
2 Segment analysis 7 9 16 13 5 9 5 13 15 7 8 5 112 90%
3 Analysis of financial position 5 10 16 13 6 9 6 14 17 7 9 7 119 95%
4 Capital investments and expenditures 7 10 16 13 6 9 7 14 17 7 9 6 121 97%
5 Analysis of cash flows 6 2 15 10 6 9 4 12 14 7 8 5 98 78%
6 Liquidity 7 10 16 13 6 9 8 14 17 7 10 7 124 99%
7 Quarterly financial information 7 10 16 13 6 9 8 14 17 7 10 7 124 99%
Accounting policy changes
8 7 10 16 13 6 9 8 14 17 7 10 7 124 99%
not yet implemented
9 Statement of management’s responsibility 7 10 16 12 6 9 8 14 17 7 10 8 124 99%
10 Financial statements/auditor’s report 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
11 Historical summary (minimum 5 years) 7 7 16 13 6 8 6 10 12 3 8 4 100 80$
12 Performance measures 7 10 16 13 6 9 7 14 17 7 10 7 123 98%
13 Share data 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
E SUPPLEMENTARY INFORMATION
1 Table of contents/navigation 6 10 16 13 6 9 6 14 17 7 10 8 122 98%
2 Glossary of terms 5 4 7 9 3 4 0 6 15 0 4 1 58 46%
3 Corporate directory 7 10 16 13 6 9 7 14 17 7 10 8 124 99%
4 Shareholder and investor information 7 10 16 13 6 9 7 14 17 7 10 8 124 99%

Corporate Reporting to Stakeholders

APPENDIX B (cont.) Communications and Media
SUMMARY OF SURVEY RESULTS Consumer Discretionary
Diversified Industries
Financial Services
Forest Products
Industrials and Energy
Life Sciences and Technology
Mining
Oil and Gas
Real Estate
Utilities and Pipelines
Small Cap/Venture
Industry Classification
1 2 3 4 5 6 7 8 9 10 11 12 Total %
Number of companies by industry 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
F FORM AND PRESENTATION
1 Pictures 16 19 14 16 13 22 13 16 17 14 13 12 15
2 Tables 21 15 17 32 22 15 13 23 27 18 17 7 19
3 Date of issuance 7 10 16 13 6 9 8 14 17 7 10 8 125 100%
Average days to issue (from
4 60 58 49 40 44 50 46 62 55 44 43 57 51
fiscal year end)
5 Average number of pages 109 80 80 124 113 86 82 90 88 64 70 52 87
G ELECTRONIC DISCLOSURES
1 Company website reference 7 7 16 13 6 9 8 14 17 7 10 8 122 98%
2 Indication of additional information 7 5 14 13 5 8 7 7 17 4 8 3 98 78%
a) financial reporting 4 2 9 9 2 6 4 2 12 2 5 2 59 47%
b) governance 5 3 7 6 4 4 3 4 8 1 2 2 49 39%
c) sustainability 1 1 2 5 0 1 0 2 6 0 3 0 21 17%
3 Regulatory information 3 6 10 9 2 9 3 5 10 4 6 1 68 54%
a) company website reference 4 1 4 4 2 4 2 0 6 2 1 0 30 24%
b) SEDAR reference 5 6 11 10 3 9 4 11 15 6 8 7 95 76%
c) EDGAR reference 4 1 2 4 2 2 2 3 5 0 0 0 25 20%

Appendix B / Annual Report Survey Results

 Appendix C
Guidelines for
Corporate Reporting
This appendix provides
guidance to those
responsible for corporate
reporting. The objective
is to communicate timely,
reliable and relevant
information to help readers
make decisions or increase
understanding. It poses
a series of questions that
merit consideration if
corporate reporting is to
meet, more effectively,
the information needs
of investors and other
stakeholders.
The guidance is not intended as a rigid checklist. Neither
is it intended to prescribe a standardized form, content or
presentation for corporate reports. Each company’s particular
characteristics will determine which questions its management
will need to answer. Also, variations in the answers will
be necessary to meet the requirements of differing
circumstances.
A. CORPORATE OVERVIEW
(discussed in Chapter 5)
Does the corporate report explain what the company is all
about and the economic environment within which it operates
by providing the following information:
• a corporate profile identifying the industry or industry
segment, the company’s business and/or the geographic
location of operations;
• the corporate mission in a broad statement of the
company’s purpose, disclosing what the company is, what
it is doing, why it is doing it and whether it is sustainable;
• principal products and services, disclosing the location
of principal markets, plants and properties, distribution
channels, major customers, raw material sources and
trade/brand names;
• ownership and control, disclosing the majority and
minority interests, principal shareholders and geographic
distribution of shares;
• the organizational structure, identifying domestic and/or
international operations, the major organizational units,
operating divisions or lines of business;
• information on the management team, giving the names
of senior officers and outlining any significant changes
Corporate Reporting to Stakeholders
 in organizational units or in key
management personnel during the year;
• management committees, identifying the
name and purpose of each committee and
the members;
• comparative financial highlights on the
results of operations, financial position,
cash flow and per share data, utilizing
financial ratios, percentage change data
and graphics;
• a letter from the president or CEO
providing an overview of performance for
the past year, summarizing key or unusual
events and discussing future prospects;
• a commentary on the industry and/or the
economy in which the company operates,
discussing matters such as recent trends,
risks and uncertainties and/or economic
factors;
• the company’s outlook disclosing the
future prospects with regard to the year
ahead and the operating or business cycle?
B. CORPORATE SOCIAL
RESPONSIBILITIES
(discussed in Chapter 6)
Does the corporate report explain how the
company is meeting its social responsibilities
to the public by providing:
• some human resources information, such
as size of workforce, labour relations,
compensation and pay equity, staff
training and retention, productivity
measures and efforts to improve
management/employee communications;
• some social responsibilities information
about the company’s overall community
involvement, philanthropy and sustainable
economic growth and development;
Appendix C / Guidelines for Corporate Reporting
• some environmental responsibilities
information, such as the company’s
environmental policy, the impact
of operations on the environment,
environmental risk management, expenses
or contingencies, climate change and
applicable legislation?
C. REVIEW OF OPERATIONS
(discussed in Chapter 7)
Does the corporate report discuss what
the company has done and plans to do
and whether it has the necessary financial
and other resources to achieve its goals by
providing the following information:
• management’s overall review and
interpretation covering a historical and/or
forward-looking analysis of the business
and discussing material events and
uncertainties;
• a qualitative segment review of operations
based on how management views the
company’s lines of business or industry
segments, addressing major developments
in the past fiscal year, unique aspects of
foreign operations and outlook for the
ensuing fiscal year;
• production information, such as practices
regarding acquisition of raw materials,
capacity utilization, physical output and
productivity or efficiency measures;
• competitive conditions, disclosing
significant factors that may have an
impact on the company’s competitive
position and the relative market or
industry position for its major products
and services;
• response to change, describing how
the company has dealt with changes in
the operating environment and external
factors over the current and previous
years;
• some forward-looking information,
discussing currently known facts that
are likely to materially affect the future
of the company and expectations
about performance (for example, future
prospects, future capital expenditure
commitments and future financing plans);
• information on risks and uncertainties that
could reasonably be expected to have a
major impact on the company’s financial
position or operating results;
• financial and operating objectives for the
ensuing fiscal year;
• performance compared to objectives
established in the previous fiscal year;
• research and development, explaining
current activities, significant new products
and processes and amounts expensed
and/or capitalized during the fiscal year;
• information about significant agreements
and contracts — whether approved,
pending or expiring — that could have
a significant impact on the company’s
current or future operations or
profitability;
• industry-specific data on matters of
particular interest for the industry
classification?
D. FINANCIAL SUMMARY
AND ANALYSIS
(discussed in Chapter 8)
Does the corporate report depict where the
company is now by providing the following
information:
• a comparative discussion and analysis of
operating results with a focus on changes
that have occurred in the components
of revenue and expense for the past two
fiscal years;
• a segment analysis covering key statistics,
such as gross revenues, significant capital
and operating expenditures, operating
income, return on shareholders’ equity and
capital and total assets;
• a comparative discussion and analysis of
financial position with a focus on changes
that have occurred in the assets and
liabilities for the past two fiscal years,
explaining why changes have occurred or
expected changes have not occurred;
• a review of capital investments and
expenditures covering fixed asset
purchases, business acquisitions, increases
in investment holdings and/or other
business development initiatives;
• a comparative discussion and analysis of
cash flows for the past two fiscal years,
including descriptions and amounts
of unusual or infrequent events or
transactions, or any significant economic
changes that have had (or could have) a
significant effect on continuing operations;
• information about liquidity, including
working capital requirements, sources
of funding and the circumstances that
could affect those sources, the company’s
ability to meet obligations as they become
due and how it expects to resolve any
deficiencies, and any restrictions on
the ability to transfer funds within the
organization;
• quarterly financial information, such as
total revenue or net sales, net income
in total and on a per-share and diluted-
per-share basis, earnings-per-share, net
income before discontinued operations
and extraordinary items, in total and on
a per-share and diluted-per-share basis,
nonrecurring or exceptional income/
expense items, a reconciliation of amounts
Corporate Reporting to Stakeholders
 previously reported along with an
explanation for any differences, and a brief
commentary on fourth quarter operating
results and major developments;
• information about accounting policy
changes not yet implemented and their
estimated impact on future operating
results including, where applicable, a
reconciliation of any important differences
between Canadian and US GAAP matters of interest to investors and other
or international financial reporting
standards (IFRS);
• a statement of management’s
responsibility for the financial statements
and for other information in the corporate
report, making reference to estimates and
judgments, internal control, the auditor’s
and the audit committee’s responsibilities
and roles and corporate ethics;
• the financial statements and auditor’s
report;
• a historical summary of selected financial
data, such as net sales or total revenues,
income before extraordinary items, total
assets, long-term financial liabilities,
preferred shares, shareholders’ equity,
dividends, net earnings and earnings-per-
share (for at least five years);
• industry-specific performance measures,
such as non-GAAP measures, along with
standard financial ratio analysis of matters
Appendix C / Guidelines for Corporate Reporting
such as profitability, solvency, liquidity and
productivity;
• share data such as outstanding share
capital, share trading summary, dividend
record and policy?
E. SUPPLEMENTARY INFORMATION
(discussed in Chapter 9)
Does the corporate report address other
stakeholders by providing the following
information:
• a table of contents or other means of
navigation, for example, on a company
website;
• a glossary of terms, practices and/or
concepts relative to the specific nature
of operations or the industry in which the
company operates;
• a corporate directory identifying
the company’s directors, key board
committees and a brief profile of each
director;
• shareholder and investor information
such as the date, time and location of the
annual general meeting, stock exchanges
and share trading symbol, transfer
agent/registrar/trustees and respective
addresses, any shareholder investment
plans, address of corporate head office
and investor relations contacts?
 Appendix D
Corporate Website
Survey Results
This appendix presents
the findings of a survey
of corporate reporting on
the Internet.1 The survey
analyzed the websites
of 125 companies that
participated in the CICA
Corporate Reporting
Awards program for
the 2005 or 2006
competitions.2 Appendix A
provides an alphabetical list
of the survey companies,
along with the website
address (URL) for each
company, classified by
industry sector.
The main objective of the survey was to identify instances
of disclosure of various types of financial and business
information. In most cases, this called for a subjective
assessment of the data provided on company websites.
Because the survey made no attempt to judge the quality
of information disclosures, caution must be exercised
when interpreting its results. To facilitate understanding of
these results, Chapter 12 offers additional explanations and
interpretations, particularly as they relate to the disclosure of
essential information and the use of technology to enhance
communications with stakeholders.
Exhibit D1 provides an overview of the percentage of survey
companies providing information classified under the 10
main categories. It also indicates where the information was
located, either on investor relations section of the website or
elsewhere. General observations on the survey findings are
set out below. Details of the survey results — by category of
information and location within the company website — are
presented in Exhibit D2.
1. Aline Girard, PhD, CA, Associate Professor at HEC Montreal, carried out
the corporate website survey on behalf of the Study Group.
2. When the survey was undertaken in mid-2007, eight companies had
been sold, leaving 117 websites to survey.
Corporate Reporting to Stakeholders
Exhibit D1
distinct webpage for financial information
Category of General Investor and reports. Such information included
Information Website Relations Total
/ Location Pages Pages links to regulatory websites (SEDAR and
EDGAR), annual reports and quarterly
1 Communication 95% 5% 100%
reports.
2 Investor Relations 0% 99% 99%
3 Financial 21% 75% 96% 4. Management: Almost all of the companies
4 Management 93% 1% 94% surveyed offered management data,
5 Governance 52% 32% 84% primarily on their general website pages
6 Human Resources 78% 0% 78% (93%). Companies provided information
Social
about the business internal environment,
7 63% 0% 63% key people (mainly about management
Responsibility
8 Marketing 67% 1% 68% team), mission, the business external
environment (mainly about markets) and
9 Production 40% 3% 43%
strategy.
10 Miscellaneous 39% 3% 42%

5. Governance: Most of the companies

GENERAL OBSERVATIONS
ON SURVEY FINDINGS
1. Communication: All of the companies
surveyed provided communication data,
primarily on the general website pages
(95%). Companies are using their websites
to communicate with stakeholders in
various ways, for example, news releases,
media contact people, live presentation
or live conferences (webcasts), providing
access to different documents or by
producing information directly on the
website.
2. Investor Relations: Virtually all of the
companies gave investor relations data,
primarily on their investor relations pages
(99%), but a few companies provide some
of this information elsewhere on their
websites. It included share data, covering
analyst, investor presentations, dividend
policy and contact information.
3. Financial: Virtually all of the companies
surveyed (96%) provided financial data,
primarily on their investor relations pages
(75%), but many also provide some types
of financial information elsewhere on their
websites (21%). A few companies use a
surveyed (84%) also offered governance
information, primarily on the general
website pages (52%) for reference by all
stakeholders. Many put such information
only on the investor relations pages (32%)
mainly for the attention of investors and
shareholders. The data included various
governance practices, information on the
board of directors, code of ethics and
mandates.
6. Human Resources: The majority of the
companies surveyed provided human
resources data on their general website
pages (78%). Most was about career
availability.
7. Social Responsibility: Many of the
companies had social responsibility data
on their general website pages (63%),
including information about community
involvement (47%), environmental matters
(36%) and sustainability (25%).
8. Marketing: Many of the companies had
marketing data on their general website
pages (68%), mostly about company
products/services and customer services.

Appendix D / Corporate Website Survey Results

9. Production: Less than half of the
companies provided production data, and
that appeared primarily on their general
website pages (43%). It included analytical
data and information on the company
operating structure.
10. Miscellaneous: Less than half the
companies surveyed gave miscellaneous
data, such as a glossary and a search
tool, placing it primarily on their general
website pages (42%).

Exhibit D2
Corporate Website General Website Pages
Survey Results
Investor Relations Pages
Total
%
Type of Data Number of Companies
1 Communications 111 6 117 100%
News & Media 103 14 117 100%
News Releases 54 43 97 83%
Events Calendar 12 67 79 68%
Media Contact / Contact us 62 3 65 56%
Webcast 10 41 51 44%
Archives 16 10 26 22%
Privacy Policy 19 6 25 21%
Speeches 13 9 22 19%
E-mail subscriptions / Alert 18 3 21 18%
Special Announcements 17 3 20 17%
Download Library / publications 18 1 19 16%
Financial press releases 4 12 16 14%
Photos / Videos / Graphics 15 0 15 13%
2 Investor relations 0 116 116 99%
Shareholder Information 2 45 47 40%
Share data 4 84 88 75%
Investor Information 9 63 72 62%
Covering Analyst 3 76 79 68%
Investor presentations 2 72 74 63%
Dividend Timetable / Policy 3 58 61 52%
Contacts 1 56 57 49%
Document request / Investor kit 3 47 50 43%
Fact Sheet 1 40 41 35%
FAQ 0 39 39 33%
E-mail alerts 2 22 24 21%
Conference calls 2 22 24 21%
Annual General Meeting 0 12 12 10%

Corporate Reporting to Stakeholders

Exhibit D2 (cont.)
Corporate Website General Website Pages
Survey Results
Investor Relations Pages
Total
%
Type of Data Number of Companies
3 Financial 25 87 112 96%
Reports 11 95 106 91%
Sedar & Edgar weblinks 6 66 72 62%
Annual Reports 6 55 61 52%
Financial Reports 7 52 59 50%
Quarterly Reports 6 47 53 45%
Archives 1 15 16 14%
Analytical review 35 17 52 44%
Quantitative bird’s eye view 15 19 34 29%
Financial highlights 6 12 18 15%
Quarterly information 5 11 16 14%
4 Management 109 1 110 94%
Business (internal environment) 106 5 111 95%
Corporate profile 78 10 88 75%
Organizational structure 48 2 50 43%
History 46 0 46 39%
Our business at a glance 17 2 19 16%
Highlights (key events) 16 1 17 15%
Legal 15 1 16 14%
Key people 56 14 70 60%
Management team 25 2 27 23%
Corporate officers 17 6 23 20%
Executive management 14 2 16 14%
Senior management 9 6 15 13%
Mission 30 0 30 26%
Mission statement 26 1 27 23%
Values 18 1 19 16%
Business (external environment) 26 3 29 25%
Industry (market) information 22 5 27 23%
Strategy 20 5 25 21%
Strategy overview 17 4 21 18%
5 Governance 61 37 98 84%
Corporate Governance 39 40 79 68%
Board of Directors (Trustees) 36 24 60 51%
Code of Ethics /Conduct 26 9 35 30%
Corporate Governance Practices 21 9 30 26%
Biographies & Board Committees 14 12 26 22%
Mandates 9 9 18 15%

Appendix D / Corporate Website Survey Results

Exhibit D2 (cont.)
Corporate Website General Website Pages
Survey Results
Investor Relations Pages
Total
%
Type of Data Number of Companies
6 Human Resources 91 0 91 78%
Careers 90 0 90 77%
Employees 17 0 17 15%
7 Social Responsibility 74 0 74 63%
Community involvment 55 0 55 47$
Sponsorships 19 0 19 16%
Sustainability 28 1 29 25%
Speeches 13 9 22 19%
8 Marketing 79 1 80 68%
Products/services 79 1 80 68%
Segmented information 48 0 48 41%
Research & Development 27 0 27 23%
Customers 39 1 40 34%
Customer services / warranties 26 0 26 22%
9 Production 47 3 50 43%
Analytical review 39 1 40 34%
Segmented operations review 25 1 26 22%
Operations Review 17 0 17 15%
Operations 15 1 16 14%
Operating structure 34 0 34 29%
Map of operations 25 1 26 22%
10 Miscellaneous 45 4 49 42%
Glossary 19 4 23 20%
Search tool 14 2 16 14%
FAQ 11 2 13 11%
Corporate directory 10 3 13 11%

Corporate Reporting to Stakeholders

 Appendix E

Overview of
Narrative Reporting
Requirements
So regardless of whether REQUIREMENTS IN CANADA, UNITED KINGDOM
2
it is described as a AND UNITED STATES
management discussion
and analysis, operating
and financial review, or
something else, the issue
remains “how well does
your reporting articulate
the direction of travel, in
relation to the markets
in which you operate,
your chosen strategy and
the performance that is
delivered?” 1 Canada
In Canada, the requirements for Management’s Discussion
and Analysis (MD&A) are mandated by the provincial/
territorial securities regulatory bodies, collectively known as
the Canadian Securities Administrators (CSA). In December
2003, the CSA issued National Instrument 51-102 Continuous
Disclosure Obligations that set out new MD&A requirements
applicable in all jurisdictions in Canada. CSA Form 51-102F1,
Part 1(a) states that “MD&A is a narrative explanation, through
the eyes of management, of how your company performed
during the period covered by the financial statements, and of
your company’s financial condition and future prospects.”

The Canadian Institute of Chartered Accountants (CICA)

published guidance on MD&A disclosure in November 2002
(updated in May 2004) that sets out six principles and a five-
part framework of recommended disclosure practices. The
CICA has no mandate to issue standards for MD&A disclosure
nor to require companies to issue MD&A. As previously noted,
this is a regulatory responsibility and prerogative. Nonetheless,

Corporate Reporting to Stakeholders

the four largest provincial securities regulators
in Canada have issued explicit encouragement
for companies to make use of the CICA
Guidance. 3
United Kingdom
In 2005, the Government of the United
Kingdom (UK) called for public companies
to prepare an operating and financial review
(OFR). The OFR is aimed at providing a
balanced and comprehensive analysis,
consistent with the size and complexity of the
business, of the following:
• the development and performance of
the business of the company during the
financial year;
• the position of the company at the end of
the year;
• the main trends and factors underlying the
development, performance and position
of the company’s business during the
financial year; and
• the main trends and factors likely to
affect the company’s future development,
performance and position, which will
assist investors in assessing the company’s
strategies and the potential for those
strategies to succeed.
The UK Accounting Standards Board (ASB)
issued Reporting Standard (RS 1) in May
2005. RS 1 defines an OFR as “a narrative
explanation, provided in the annual report,
of the main trends and factors underlying
the development, performance and position
of an entity during the financial year
covered by the financial statements, and
which are likely to affect the entity’s future
development, performance and position.”
It is a principles-based standard, which
makes clear that the OFR must reflect the
directors’ view of the business. The ASB has
also prepared implementation guidance that
provides illustrations and suggestions of
Appendix E / Overview of Narrative Reporting Requirements
specific content and related key performance
indicators that might be included in an OFR.
United States
The Securities and Exchange Commission
(SEC) is the national securities regulator in
the United States. The SEC is charged with
administration, rulemaking and enforcement
under the Securities Act of 1933 and Securities
Exchange Act of 1934. In 2002, the Sarbanes-
Oxley Act introduced significant additional
rules.4 A comprehensive overview of the
evolution, purpose and content of the MD&A
is provided in the Interpretive Guidance
released by the SEC in December 2003
(release numbers 33-8350 and 34-48960).
The guidance states that “The purpose of
the MD&A is not complicated. It is to provide
readers with information necessary to an
understanding of a company’s financial
condition, changes in financial condition and
results of operations.”
The MD&A requirements are:
• to provide a narrative explanation of
a company’s financial statements that
enables investors to see the company
through the eyes of management;
• to enhance the overall financial disclosure
and provide the context within which
financial information should be analyzed;
and
• to provide information about the quality
and potential variability of a company’s
earnings and cash flow, so that investors
can ascertain the likelihood that past
performance is indicative of future
performance.
Those requirements further state that
companies should identify and discuss
key performance indicators, including
non-financial performance indicators that their
management uses to manage the business
and that would be material to investors.
 5
INTERNATIONAL REQUIREMENTS
IASB Management
Commentary Initiative
In October 2002, the International Accounting
Standards Board (IASB) and its partner
national standard setters recommended that
work should begin on a project to examine
whether the IASB should develop standards or
guidance for management commentary. There
was general acknowledgement that guidance
on this topic was needed and that preparers
of financial statements were looking to both
the IASB and the International Organization of
Securities Commissions (and others) to provide
it. Views were divided on the status any IASB
guidance should have. The consensus at that
meeting supported the eventual inclusion in
IAS 1 Presentation of Financial Statements of
a requirement to prepare a narrative report,
coupled with non-mandatory implementation
guidance on what ought and ought not to be
included in such a report.
In October 2005, the IASB published a
discussion paper Management Commentary
that assesses the role the IASB could play
in improving the quality of the management
commentary that accompanies financial
statements. The discussion paper was
prepared for the IASB by staff of its partner
standard setters from the United Kingdom,
Germany, New Zealand and Canada. The
discussion paper reviews existing national
requirements or principles on management
commentary and offers recommendations
on how the IASB might promote the wider
adoption of best practice in the interests
of investors and others who use financial
reports. In January 2007, the IASB discussed
a summary of the comment letters received in
response to the discussion paper. It planned
to decide in December 2007 whether to add
the project to its agenda.6
The discussion paper expresses the view that
management commentary is the primary
component of the information within the
term “other financial reporting provided
outside the financial statements.” It notes that
management commentary is information that
accompanies the financial statements as part
of a company’s financial reporting. It explains
the main trends and factors underlying the
development, performance and position of the
company’s business during the period covered
by the financial statements. It also explains the
main trends and factors that are likely to affect
future development, performance and position.
The main differences between that definition
and the Canadian and UK definitions are:
• the term “narrative” has not been used,
as it could be interpreted by some to
mean that management commentary
does not need to contain quantified
measures, which are an essential element
of management commentary.
• the phrase “through the eyes of
management” has not been included
due to a preference to express this as
a principle underpinning management
commentary.
• a reference to “the main trends and
factors that are likely to affect the entity’s
future” has been added to make it clear.
Corporate Reporting to Stakeholders
According to the discussion paper, the
objective of management commentary has
three elements: it is to provide information to
help investors:
• interpret and assess the related financial
statements in the context of the
environment in which a company operates;
• assess what management views as the
most important issues facing a company
and how it intends to manage those
issues; and
• assess strategies a company has adopted
and the likelihood that those strategies will
be successful.
International Organization
of Securities Commissions
The International Organization of Securities
Commissions (IOSCO) issued a report
General Principles Regarding Disclosure of
Appendix E / Overview of Narrative Reporting Requirements
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
(MD&A) in February 2003. The report
summarizes the objectives of MD&A, identifies
principles for preparers and highlights areas
where preparers should be cautious (for
example, to avoid boiler-plate disclosures).
The report states that: “The purpose of
the MD&A is to provide management’s
explanation of factors that have affected the
company’s financial condition and results
of operations for the historical periods
covered by the financial statements, and
management’s assessment of factors and
trends which are anticipated to have a
material effect on the company’s financial
condition and results of operations in the
future. Companies should provide the
information that is necessary for an investor’s
understanding of the company’s financial
condition, changes in financial condition and
results of operations.”
Notes:

1. Introduction, Guide to forward-looking 4. For example, the SEC has issued rules and
information (London: PricewaterhouseCoopers proposals on topics including critical accounting
LLP, 2007 (available at www.corporatereporting. policies and estimates, liquidity, capital resources,
com). off balance sheet arrangements, aggregate
contractual obligations and transactions with
2. The graphic excerpt is from Guide to forward- non-independent third parties. Details are on the
looking information, ibid., p. 2 (available at SEC website (www.sec.gov/).
www.corporatereporting.com).
5. The graphic excerpt is from Guide to forward-
3. The CICA has prepared a comprehensive looking information, op.cit., p.2 (available at
package of materials to assist preparers and www.corporatereporting.com).
reviewers of Management’s Discussion and
Analysis (MD&A). The package includes: 6. Information on the current status of the
Management’s Discussion and Analysis: Guidance Management Commentary initiative is
on Preparation and Disclosure; 20 Questions available on the IASB website (www.iasb.
Directors Should Ask about Management’s org/Current+Projects/IASB+Projects/
Discussion and Analysis; MD&A Disclosure Management+Commentary/
about the Financial Impact of Climate Change Management+Commentary.htm).
and Other Environmental Issues; Building a
Better MD&A: A Guide for Smaller Issuers;
and Management’s Discussion and Analysis:
Self Assessment Tool for Preparers. The CICA
website also hosts the MD&A Resource Centre
(www.cica.ca/index.cfm/ci_id/622/la_id/1.htm)
which contains: regulatory website links; a list
of reading materials; a summary of landmark
legal cases relating to MD&A; examples of MD&A
disclosures; links to other helpful resources, such
as risk models; and a non-authoritative CICA
staff bulletin CPR Alert (www.cica.ca/index.cfm/
ci_id/247/la_id/1.htm).

Corporate Reporting to Stakeholders

 Appendix F
Future Research
The research undertaken
and the guidance conveyed
in the Research Study
provide broad coverage
of many different types
of information, some
of which merit further
consideration. For example,
the CICA Corporate
Reporting Awards
program recognizes that
aspects of increasing
relevance to stakeholders
now include corporate
governance, sustainability
reporting and electronic
disclosure. With the rising
stakeholder expectation
of transparency, the Study
Group concluded that
these areas merit additional
study.
Corporate governance continues to receive a high level of
attention. Valuable lessons have been learned from the series of
corporate collapses that occurred in different parts of the world
in the early part of this decade. Since then, significant efforts
have been made to strengthen the regulatory frameworks in
this area to restore investor confidence and enhance corporate
transparency and accountability. Further guidance is needed.
Sustainability reporting is about measuring, disclosing and
being accountable for organizational performance having
economic, environmental and social impacts. A diverse
range of stakeholders, including investors, is now demanding
transparency about the sustainability of corporate activities.
In response, new global reporting standards are being
developed — standards that can be used to provide assurance
on matters such as the financial implications of climate change
issues. Most companies are still in the start-up phase when
it comes to sustainability reporting. They are trying to find
their way in managing and reporting on corporate social
responsibilities, which might mean something different for
each company. They are asking for guidance.
Electronic disclosure and web-based reporting of both
financial and non-financial information is now commonplace.
With the rapid advancement of information technology,
particularly the Internet and related technologies such as
XBRL (eXtensible Business Reporting Language), companies
are adopting new means of communicating with investors and
other stakeholders. For example, information is being delivered
online in the form of corporate news, quarterly earnings
releases, annual reports (typically in PDF format), audio and/or
video conferencing and e-mail alerts. Together, organizations
and stakeholders are shifting to a new paradigm — real-time
online reporting. This area merits further study.
Corporate Reporting to Stakeholders
Selected Bibliography
AR Trends 2007. BarnesMcInerney Inc. and Craib Group of
Companies. Toronto, 2007. (http://www.barnesmcinerney.
com/assets/PDFs/ARtrends2007_all.pdf).

Barcelo, Yan. “Standards Overload Blues.” CAmagazine

(March 2007). (http://www.camagazine.com/index.cfm/
ci_id/35948/la_id/1).

Blueprint for a Canadian Securities Commission, Crawford

Panel on A Single Canadian Securities Regulator. Final
Paper. Toronto: Ontario Ministry of Government Services,
June 7, 2006. (http://www.crawfordpanel.ca/Crawford_
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NOTES

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NOTES

Notes
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Corporate Reporting to Stakeholders

NOTES

Notes
 Insights for a Changing World

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