Our research suggests not. Annual reports have become increasingly long and complex. While companies may provide extensive information, readers can struggle to identify what matters. Generic or highly standardised disclosures can satisfy regulatory requirements without necessarily helping investors understand the specific risks facing an organisation. We therefore examined disclosures relating to expected credit losses in banks. In particular, we investigated which types of information appear most useful to markets and financial analysts. The findings point to an important distinction between the “quantity” and “quality” of information. Disclosures appear to be most useful when they are specific to the organisation and provide meaningful explanations of uncertainty. Information about alternative economic scenarios and forwardlooking assumptions can help users understand not simply the number reported, but how that number was reached, and how it might change. This is particularly important when financial markets face uncertainty. The lesson extends beyond financial instruments. In an information-rich world, transparency is not simply about producing more data. It is about communicating information that helps people make better decisions. RARELY SIMPLE ANSWERS The challenge is to identify what information genuinely helps people understand economic reality. In this sense, financial reporting standards are part of the hidden infrastructure of financial markets. They shape how risks are measured, communicated and understood. Getting financial reporting right may sound like a technical challenge, but at its heart lies a much broader question, one that matters to investors, businesses and society alike: How can we make better decisions when the future is uncertain? Finding better answers to that question is essential to building financial markets that are more transparent, resilient and sustainable. Developing financial reporting standards that provide reliable, transparent and useful information is an important challenge for global standard setters and regulators, and one to which research such as that we are undertaking at Lancaster can make a direct contribution. MAKING A CONTRIBUTION Academics cannot do this in isolation. We need to work with those on the front line. I was appointed as an external consultant to the International Financial Reporting Standards Foundation in 2023. The Foundation oversees the development of IFRS Accounting Standards, used across much of the world. I support projects of the International Accounting Standards Board (IASB) relating to IFRS 9: Financial Instruments and IFRS 7: Financial Instruments: Disclosures, and collaborate with IFRS technical staff, IASB members, and other academics, to contribute research evidence to discussions about the application and effectiveness of these standards. This policymaking involvement extends beyond international standard-setting. I am a member of the Academic Panel of EFRAG (formerly known as the European Financial Reporting Advisory Group). We contribute to the development of IFRS Accounting Standards and provide endorsement advice to the European Commission on their adoption within Europe, while EFRAG as a whole leads the development of, and provides implementation support for, the European Sustainability Reporting Standards (ESRS). I bring academic expertise and research evidence, providing input on research priorities, project scope, methodologies and research outputs. Through this work, I have contributed to a range of projects spanning financial and sustainability reporting. Ultimately, the close relationship between research and policymaking helps ensure that financial reporting regulation is shaped not only by technical considerations, but also by robust evidence of how it works. By bringing research such as ours into the standard-setting process, policymakers can better understand how reporting requirements affect investors, companies and financial markets, while also anticipating the unintended consequences of new rules as markets and business practices evolve. FIFTY FOUR DEGREES | 13 Argyro Panaretou is a Professor of Accounting in the Department of Accounting and Finance at Lancaster University Management School. Her research focuses on the fields of accounting for financial instruments, fair value accounting, credit risk reporting, and hedge accounting. She has received a Leverhulme Trust Research project grant for Reporting financial instruments for better markets between 2023 and 2026. a.panaretou@lancaster.ac.uk
RkJQdWJsaXNoZXIy NTI5NzM=