The future of financial reporting

FINANCIAL REPORTING IS LEGACY OF THE ANALOGUE ERA

Companies are essentially reporting on themselves - a massive CONFLICT OF INTEREST, exacerbated by scarcity of CFO-suite talent, human error, time delay, and lack of verification/accountability. Audit is intrinsically conflicted, expensive post-mortem process that does not help to understand the current situation, much less so future.

This leads to poor credit risk assessment, and therefore distorted credit picture. In absence of credit-based risk models creditors charge credit prices based on "risk buckets". I.e. well-performing companies overpay for credit, while underperforming - underpay. And some are excluded from credit completely!

So what are the problems with the way financial reporting is done today?

1) Information asymmetries

2) No single source of truth - for investors and management

3) financial statements are backward looking - "post-mortem"

4) financial statements are error prone

5) financial statements are "low resolution"

6) financial statements are a fertile ground for manipulation

7) financial reporting creates a massive bottle neck of the adequate CFO-suite talent!

8) Prevents from efficiently pricing credit risk on the company level

9) As a result, companies overpay for credit, investors pay equity premium for obscurity!

Contacts: eanfimova@crelia.capital, +1(347)223-2476, www.crelia.capital