The document discusses restoring public trust in corporate reporting. It proposes a three-tiered model for corporate transparency consisting of global accounting standards, industry standards, and company-specific information. Recent scandals have undermined trust in executives, boards, auditors, and analysts that produce corporate information. To rebuild trust, all participants must embrace transparency, accountability, and integrity. New technologies like XBRL can improve access and analysis of reported information across the three tiers. The future of corporate reporting relies on cooperation across industries to establish comprehensive transparency standards.

1. Focus Take-Aways
Rating (10 is best)
Overall Applicability Innovation Style
To purchase individual Abstracts, personal subscriptions or corporate solutions, visit our Web site at www.getAbstract.com
or call us at our U.S. office (954-359-4070) or Switzerland office (+41-41-367-5151). getAbstract is an Internet-based knowledge rating
service and publisher of book Abstracts. getAbstract maintains complete editorial responsibility for all parts of this Abstract. The respective
copyrights of authors and publishers are acknowledged. All rights reserved. No part of this abstract may be reproduced or transmitted
in any form or by any means, electronic, photocopying, or otherwise, without prior written permission of getAbstract Ltd (Switzerland).
Building Public Trust
The Future of Corporate Reporting
by Samuel A. DiPiazza, Jr. and Robert G. Eccles
John Wiley & Sons © 2002
192 pages
Leadership
Strategy
Sales & Marketing
Corporate Finance
Human Resources
Technology
Production & Logistics
Small Business
Economics & Politics
Industries & Regions
Career Development
Personal Finance
Self Improvement
Ideas & Trends
• Information is the lifeblood of the capital markets.
• Recent scandals and business failures have undermined investors’ confidence in
those responsible for the content and quality of the information companies report.
• This includes company executives, boards of directors, independent auditors, third-
party analysts and information distributors — the Corporate Reporting Supply Chain.
• To restore public trust, every participant in the chain must embrace and practice a
spirit of transparency, a culture of accountability and individual integrity.
• The Three-Tier Model of Corporate Transparency, a new vision of corporate report-
ing, encompasses Global GAAP, industry-based standards and company-specific
information.
• Good external reporting requires sound internal management, clear articulation of a
value proposition and reporting on the measures most relevant to value creation.
• New Internet technologies will improve the quality and speed of reporting and
enhance corporate transparency.
• The auditing profession must address current concerns about its work and the need
to assure information reported at all three tiers.
9 10 10 9
This summary is intended for the use of IFRC employees.
LoginContext[asp=4601,lo=en,co=ET] 2015-10-04 10:51:58 CEST

2. Building Public Trust © Copyright 2002 getAbstract 2 of 5
Relevance
What You Will Learn
In this Abstract you will learn: 1) Why investors have lost confidence in the corporations,
regulators, accountants and analysts who produce and guarantee the soundness of
corporate information; 2) How the process through which companies report performance
can be made more transparent, and 3) How the development of a spirit of transparency and
a culture of a accountability can restore investor confidence in corporate information.
Recommendation
In the wake of the Enron bankruptcy, there has been plenty of teeth-gnashing about
what went wrong, but far too little analysis of what we can do to make things better.
Samuel A. DiPiazza, Jr., CEO of PricewaterhouseCoopers, and Robert G. Eccles, a PwC
fellow and former Harvard Business School Professor, take a brave stab at addressing the
fundamental shortfalls in the process through which companies report their performance.
By proposing a new vision of corporate transparency, the authors take an important
first step in reforming the corporate reporting system and restoring investor confidence.
getAbstract.com highly recommends this book to any readers wondering where the
financial community should go from here.
Abstract
The Future of Corporate Reporting
Information is the lifeblood of the capital markets. Investors risk their hard-earned capi-
tal in the markets, and they rely on information they receive from companies in making
their investment decisions. They need reliable information on a timely basis. They want
it in language they can understand, and they should receive it in formats they can easily
use for analysis. Investors have the right to expect that the benefits or consequences they
experience will result from the decisions they make, not from flawed information.
Recent corporate failures and scandals have undermined the trust that investors and
other stakeholders place in the Corporate Reporting Supply Chain: company executives,
boards of directors, independent auditing firms, information distributors and third-party
analysts. In working collaboratively to regain public trust, all of the supply chain par-
ticipants depend on standard setters and market regulators to establish and enforce the
rules under which they fulfill their roles. Supporting the entire supply chain are enabling
technologies of many kinds.
Restoring public trust will require that every participant in the Corporate Reporting
Supply Chain embrace and live by three core concepts:
1. A spirit of transparency — All members of the Corporate Reporting Supply Chain
must embrace a spirit of transparency. Corporate executives must, for example, stop
playing the Earnings Game, which seeks to manage earnings and Wall Street’s expec-
tations, and instead report forthrightly on their businesses’ critical value drivers.
2. A culture of accountability — Every member of the supply chain must hold itself
accountable: management for producing relevant and reliable information; boards of
directors for ensuring that management lives up to this obligation; independent audi-
“The future of cor-
porate reporting is
inevitably moving
toward greater
transparency.”
“Despite the many
ongoing efforts to
improve how the
markets function,
each group in-
volved has its own
goals and its own
rather narrow view
of what will make
things better.”
This summary is intended for the use of IFRC employees.
LoginContext[asp=4601,lo=en,co=ET] 2015-10-04 10:51:58 CEST

3. Building Public Trust © Copyright 2002 getAbstract 3 of 5
tors for ensuring the objectivity and independence of their audit opinions; and ana-
lysts for producing high quality, unbiased research. Investors and other stakeholders
must also hold themselves accountable for the decisions they make.
3. People of integrity — Rules, standards and frameworks can only go so far. Transparency
and accountability will be achieved only by people committed to individual integrity.
Three Tiers
The Three-Tier Model of Corporate Transparency offers a new vision of corporate
reporting:
• Tier One: A set of global generally accepted accounting principles (Global GAAP).
• Tier Two: Industry-specific standards for measuring and reporting performance,
consistently applied and developed by the industries themselves.
• Tier Three: Company-specific information including strategy, plans, risk-manage-
ment practices, compensation policies, corporate governance and performance mea-
sures unique to the company.
The three tiers should not be viewed as separate, discrete reporting levels, but as an inte-
grated model for improving corporate transparency overall.
Tier One: Global GAAP
Today, every country with a public capital market uses its own set of generally accepted
accounting principles (GAAP) or one based on other national or international standards.
The quality of these standards varies widely from country to country, as does how well
they are applied by companies and audited by independent accountants. Even the best
country-GAAP standards have come under criticism, since they are all based for the
most part on an historical cost model. Today’s complex business environment challenges
the relevance of historical cost information and is putting strain on this model.
The creation of a set of global generally accepted accounting principles — Global GAAP
— would allow companies to access the world’s capital markets more easily and with
less cost. If Global GAAP existed, investors could more easily and accurately compare
the performance of any company, in any industry, in any country, thus broadening their
range of investment choices. In adopting new global standards, market regulators world-
wide could agree to allow any company using Global GAAP to list on the exchanges
within their jurisdictions. Global GAAP would also require addressing interpretation of
and compliance with standards on a global basis.
Tier Two: Industry-Specific Standards
Investors need the ability to compare companies in any given industry in ways that
go beyond required financial reporting. In order to meet these information needs, com-
panies should supplement GAAP with other financial and nonfinancial information
regarding past performance and future prospects. Examples of supplemental financial
information include pro forma earnings and free cash flow, neither of which is covered
by any form of GAAP. Examples of nonfinancial information include performance mea-
sures relating to intangibles and other performance measures such as brands, customers
and innovation.
“The negative
consequences of
incomplete and
unreliable informa-
tion can extend
well beyond an
individual com-
pany or even the
stock market. They
can affect an
entire economy.”
“Even before the
Enron bankruptcy,
and still today, the
critics of GAAP
have been growing
in number and
complaining more
loudly, especially
in the United
States.”
“Even if many
companies in an
industry reported
on an important
piece of nonfi-
nancial informa-
tion, the useful-
ness of this infor-
mation would be
limited if one com-
pany’s set of num-
bers could not be
compared to that
of others.”
This summary is intended for the use of IFRC employees.
LoginContext[asp=4601,lo=en,co=ET] 2015-10-04 10:51:58 CEST

4. Building Public Trust © Copyright 2002 getAbstract 4 of 5
Companies also need to compare their own performance with that of industry peers.
Therefore, it is in their own best interest to voluntarily and collaboratively develop indus-
try-wide Tier-Two standards based on the critical value drivers unique to their industries.
These standards would define what industry-specific information should be reported as
a supplement to GAAP. For example, the hotel industry already has created a uniform
accounting and financial reporting system that includes “revenue per available room
(RevPAR)” as an industry-specific measure with suggested methods of calculation.
Tier Three: Company-Specific Information
Even if investors had all the information provided at the first two tiers, they would still
need additional information specific to individual companies. This information would
include management’s views of the business and the competitive environment, com-
pany strategies, unique company value drivers and the company’s commitments to other
stakeholders. Such company-specific information forms the basis of Tier Three. While
well-defined external standards cannot be developed for Tier-Three content, general
guidelines for content, as well as external standards for the format of reporting such
information, certainly could be developed.
A Reporting Framework
Within the construct of the Three-Tier Model, companies need a way to organize and
report information in a comprehensive, understandable way. The ValueReporting™
Framework offers a solution. Based on PricewaterhouseCoopers’ capital markets
research, the Framework provides a structure for internal and external reporting of
both financial and nonfinancial information along broad categories — Market Overview,
Value Strategy, Managing for Value and Value Platform — each broken down into spe-
cific elements for more detailed and transparent reporting.
The Value Platform category, for example, includes all activities and relationships that
underpin how the company creates value. These include such intangible and nonfinancial
measures as products, customers, people, innovation, supply chain and corporate reputa-
tion — for the most part the type of information that would be reported at Tier Two.
The Internet
To realize the vision of the Three-Tier Model, the members of the Corporate Reporting
Supply Chain must fully employ the capabilities of the Internet. Current electronic
reporting still relies essentially on the format of traditional, paper-based systems. Cer-
tainly, paper isn’t bad. But using paper-based formats on the Internet tends to make the
information opaque, difficult to find and even more difficult to use.
What the supply chain needs is a new way to report information. This is where Exten-
sible Business Reporting Language (XBRL) comes into play. XBRL allows for the
“tagging” of information at all three tiers to explain its meaning and to put it into
proper context. Adopting XBRL broadly will benefit investors, stakeholders and all
members of the supply chain with more complete, higher quality, more useful informa-
tion obtained more quickly and easily. A demonstration Web site, showing XBRL in
action, has been developed by Microsoft, Nasdaq and PricewaterhouseCoopers (http://
www.nasdaq.com/xbrl).
Future Audits
XBRL merely facilitates the ease with which information is generated and used.
Whether or not the information is relevant and reliable depends on standards and on an
“Knowing precisely
what one must do
often defines pre-
cisely what one
does not have to
do.”
“Stakeholders are
not data miners.
They require and
deserve clear, log-
ically presented
information.”
“XBRL will help to
level the playing
field by reducing
the time and costs
for collecting the
data for analysis,
which will take only
a few seconds at
most.”
This summary is intended for the use of IFRC employees.
LoginContext[asp=4601,lo=en,co=ET] 2015-10-04 10:51:58 CEST

5. Building Public Trust © Copyright 2002 getAbstract 5 of 5
independent audit or assurance opinion on the information. Today auditing firms focus
primarily on producing audit opinions on the type of financial information at Tier-One.
Even here there is a broadly perceived “Expectations Gap” between what an audit opin-
ion actually means (assurance that the financial statements are a “true and fair” view of
the company’s financial performance) and what some believe or hope it means (valida-
tion of the health and soundness of the company).
Closing the Expectations Gap will require a broader audit opinion at Tier One regard-
ing such aspects as estimates made by management, the possibility of fraud, risks,
liquidity and future scenarios. Realizing the broader intent of this future audit opinion
will require development of a set of global generally accepted auditing standards (Global
GAAS) to ensure that the necessary work has been done to make the audit opinion cred-
ible. Improving the Tier One audit alone, however, will not close the Expectations Gap.
Doing so will also require assurance at Tier Two and Tier Three, which in turn will
require resolving issues of liability related to both companies and those who audit them.
Realizing the Vision
The transparent future of corporate reporting and auditing will become a reality only
if all participants in the Corporate Reporting Supply Chain recognize their individual
responsibilities and work together across organizational, industry and geographic bound-
aries. Investors and other stakeholders must also take responsibility for the analysis of
the information they receive and for the outcomes of the decisions they make. They will
do this far more readily when they know their decisions are based on information pre-
pared, approved and audited with transparency, accountability and integrity. This is the
future of corporate reporting and the foundation of public trust.
About The Authors
Samuel A. DiPiazza, Jr. is the CEO of PricewaterhouseCoopers, the world’s largest
professional services organization. Mr. DiPiazza joined PricewaterhouseCoopers in 1973
and most recently served as Senior Partner and Chairman of the U.S. firm with executive
responsibility for U.S. operations. Robert G. Eccles is a founder and president of
Advisory Capital Partners, Inc. (ACP), and a Senior Fellow of PricewaterhouseCoopers.
Prior to founding ACP, Dr. Eccles was a full professor at Harvard Business School,
where he was a faculty member for 14 years, receiving tenure in 1989.
Buzz-Words
Corporate Reporting Supply Chain / Extensible Business Reporting Language (XBRL)
/ Global GAAP / Three-Tier Model of Corporate Transparency / ValueReporting
“This much is
abundantly clear:
Independent audit-
ing firms must
address the ques-
tions raised about
the quality and rel-
evance of their
work. They must
do this quickly
because public
trust is fragile,
easy to lose and
hard to regain.”
This summary is intended for the use of IFRC employees.
LoginContext[asp=4601,lo=en,co=ET] 2015-10-04 10:51:58 CEST