PHBs look for greater transparency in financial reporting: Grant Thornton

Years of investor and regulator demands for greater transparency in financial reporting amongst listed companies is now affecting attitudes in the world of privately held businesses. More than half of leaders of privately held businesses (PHBs) globally (52%) believe that greater transparency is a key benefit of financial reporting according to latest research from the Grant Thornton International Business Report (IBR) 2010). The research covers the opinions of over 7,400 business owners across 36 economies. In India, around 350 PHBs were surveyed across 6 cities. (Bangalore, Chennai, Delhi, Kolkata, Mumbai and Pune)

Businesses in Ireland, the Philippines and Taiwan were most enthusiastic about greater transparency with 85% of businesses citing greater transparency as a key benefit. 57% of Indian businesses believe that financial reporting would bring about greater transparency in the system followed by 54% who feel this would also lead to easier access to capital.

Said Sai Venkateshwaran , Head - IFRS at Grant Thornton India, “These results indicate that even though PHBs are often under no obligation to report information about their financial results or legal structures, business leaders are increasingly recognising that in order to compete and grow they need to be more transparent and more readily comparable with competitors.”

At the same time, business owners were also asked if they had heard of International Financial Reporting Standards for Small and Medium sized Enterprises (IFRS for SMEs). IFRS for SMEs provides a substantially simplified set of internationally recognised accounting principles specifically for PHBs. "The adoption of IFRS for SMEs will allow PHBs to be more transparent and directly comparable with similar businesses around the world - a global solution to their increasing desire for greater transparency", voices Sai Venkateshwaran.

53% of businesses owners globally said they were aware of IFRS for SMEs. 68% of businesses in India are unaware about IFRS for SMEs compared to 32% who are aware of it.

Asia Pacific is the only area where the percentage of businesses who have never heard about IFRS for SMEs (58%) is higher than the percentage who has heard about these standards (30%). Ireland, Spain and Finland are the countries where businesses are most aware of IFRS for SMEs, 86%, 79% and 78% respectively. On the other end of the scale, 82% in Thailand, 65% in Taiwan and 64% in mainland China have never heard about IFRS for SMEs.

Where business owners were already aware of IFRS for SMEs, they were asked if they would like their country to adopt the standard. Globally 52% of business owners said they would like their country to adopt IFRS for SMEs with businesses in India (79%) that were supportive of adopting the standard. Mexico (89%), the Philippines (85%) and Chile (84%) were most supportive. In some countries plans are already in place to adopt the standard, while in others (including the Philippines) the standard has since been adopted. On the other end of the scale, Finnish businesses have the least enthusiasm to adopt IFRS for SMEs at 62%, followed by Japan (57%) and New Zealand (50%).

Businesses globally, recognise that financial reporting will help them reduce cost (44%) and grow their business with 37% citing easier access to capital as a key benefit. India stands at 28% in terms of reduced cost being a benefit. In Ireland, 89% of businesses cited reduced cost as a benefit, the highest proportion of all countries, followed by Malaysia (85%) and Denmark (80%). Japan (3%) and Botswana (11%) are the least likely to say that reduced cost is a benefit of financial reporting.

Easier access to capital is cited by 37% of businesses globally as a benefit of financial reporting. However only 28% of Indian businesses (less than the global figure) share the same view.