Economic Affairs

Time to relook practice of quarterly reporting

A tweak could reduce costs, promote long-term thinking for firms, amid beefed-up supervisory, disclosure regime

Finance personnel and accountants have never been able to enjoy the Chinese New Year celebrations to the full, what with having to keep one eye on the quarterly reports that need to be filed within 60 days of the Dec 31 year-end, which makes for a hectic time over the festive period which tends to fall in January or February.

And even as they busy themselves with finalising the past year's numbers, they will also have to gear up to report on the new year's first-quarter results.

The United Kingdom has done away with the requirement for quarterly reporting, spurring discussion over whether Singapore should go down the same path. It had done so in 2014 to ease the reporting burden on companies, ahead of the European Transparency Directive, which said that by November 2015, companies listed in the UK no longer needed to produce quarterly reports.

UK's asset management industry body The Investment Association late last year called on firms to cease quarterly reporting and "refocus reporting on a broader range of strategic issues". As of October last year, 30 FTSE 100 companies and 139 FTSE 250 companies had stopped publishing quarterly reports.

Quarterly reporting, however, still has its supporters. It imposes more discipline on companies. As a company embarks on an initial public offering (IPO), the discipline of regular reporting will boost the confidence of investors that the company's systems and processes are in place.


Quarterly reporting came into effect in Singapore in 2003 as part of a greater push for transparency and corporate governance among companies. Adopting best practices would boost Singapore's standing as an international business and financial centre, it was argued then.

When the then Council on Corporate Disclosure and Governance mooted the recommendations, it referred to the need for more timely reporting, given the "rapidly evolving economy and increasingly volatile markets". It also cited "smaller and younger companies, with an uncertain record, that carry the greater risk and, therefore, have an obligation for more frequent reporting".

These advantages are still relevant but quarterly reporting's detractors are just as vocal. They criticise it for encouraging a short-term mentality among senior management, where beneficial long-term decisions may not be taken as there may be a short-term impact on the quarterly earnings.


While there has been talk of a review of quarterly reporting, the latest inkling that this was on the Singapore Exchange's (SGX) to-do list for this year came from the speech given by its chief regulatory officer Tan Boon Gin at last month's Acra-SGX-SID audit committee seminar.

He said: "We see an opportunity presented by the increased transparency of financial statements, the more individual and targeted engagement with companies, the broadened definition of materiality, and the more robust enforcement of disclosure breaches by both the regulators and the market - in other words, an increase in all three disciplines - we see an opportunity to recalibrate our continuous disclosure regime."

Acra (Accounting and Corporate Regulatory Authority) has also recently announced that companieshave to restate, re-audit and refile financial statements if they commit severe reporting breaches.

What this suggests is that a beefed-up supervisory regime is in place to mitigate any potential negative impact if the quarterly reporting regime were to be tweaked.

Yesterday, Mr Tan told The Straits Times: "We have seen improvements on the disclosure front. The recent amendment to the Securities and Futures Act establishes a wider test for materiality and sets a higher standard for disclosures. SGX has been more aggressive in terms of querying companies on disclosures and taking enforcement actions against companies that fall short. We have also been engaging with individual companies on ways to improve the disclosure of information key to investors since our review of their Code of Corporate Governance disclosures."

He added that "against the backdrop of improvements on the disclosure front, we hope to launch a consultation paper around the middle of the year".


A sluggish economy - albeit with some bright spots - does complicate the discussion. Take the issue of costs for example. Quarterly reporting is often associated with added costs, even though, strictly speaking, quarterly accounts, except for the final quarter's accounts are not required to be audited.

However, head of audit at KPMG Singapore Roger Tay said: "The preparation of quarterly financial information for reporting does entail significant efforts and rigour, involving not just the finance department, but also that of senior management, the audit committee and the board of directors to review and approve the financial information before they are released. Certain larger listed companies also engage their auditors to review the quarterly financial information."

Hence, any easing of the requirements should have some cost savings.

With the economy growing slowly, changes that save companies money, without higher risk to the investor, are something that a responsive regulator such as the SGX would be open to.

If a company is going through bad times, the argument could be made that it is better for the company to focus on restructuring the business and removing the pressure of trying to ensure each quarter outpaces the previous one.

Instead of management having to focus on churning the results out and meeting analysts and investors, senior management's time could be better devoted to finding new markets, innovating and turning the business around.

After all, if a company is seeing growth of close to zero, there is little value-added from quarterly reports that show little change.

In any case, under the continuous disclosure regime, a company which has information that will affect the prospects of the company would have to update the market on a timely basis.

For short-term traders, they may trade on a daily basis and would hardly be waiting for even the quarterly results.

Naturally, the converse argument can be made. When business gets tough, the question will be whether quarterly reporting is even more crucial to investors to get updates rather than leaving investors none the wiser. However, the SGX Listing Rules say that sudden changes in financial or operating conditions must be flagged as soon as they arise.


People who believe in the benefits of quarterly reporting may be loath to give it up totally. Those who see the downside of quarterly reporting may also realise that doing away with it entirely can create its own share of problems. So perhaps, the question is not if the quarterly regime will disappear but how it will be tweaked.

Senior partner at law firm Lee & Lee, Mr Adrian Chan, puts forward two areas for improvements for quarterly reports.

Currently, all companies with a market capitalisation of $75 million and above as at Dec 31 have to report quarterly.

Mr Chan's beef with the current rules is that even if the market capitalisation should fall subsequently below $75 million, the listed company still has to stick with it.

He suggests using similar criteria to that of the Singapore Corporate Awards, which sets the bar for small caps as those below $300 million in market cap. Using $300 million would still see some 230 companies, or 30 per cent of listed firms, still subject to mandatory quarterly reporting.

Mr Chan also says that the criteria of using the market capitalisation on a single day - Dec 31 - to determine the requirement for quarterly reporting is somewhat arbitrary. "A much more reliable determinant would be one based on a longer period of time, such as a weighted average share price over a continuous period of, say, 120 market days." This would be more representative of a listed company's true size and reflective of the resources it can muster.

Others feel that there should be a more rigorous debate on the benefits of the quarterly reporting.

KPMG's Mr Tay said that "the debate should focus on the quality of reporting as opposed to the frequency of reporting as investors need reliable information to base their decisions".

To some, Singapore's standing within the finance capitals of the world is the strongest it has ever been. This is the time when it can well afford to relook the quarterly reporting regime.

A version of this article appeared in the print edition of The Straits Times on February 01, 2017, with the headline 'Time to relook practice of quarterly reporting'. Print Edition | Subscribe