What Covid-19 means for accurate company reporting

Thursday 14 May 2020

CFA UK Insights

Author: Maha Khan Phillips 

Hilary Eastman, CFA, talks to CFA UK Insights about the challenges of virtual AGMs, company reporting in the age of Covid-19, the spirit of volunteerism at CFA UK, and much more

Covid-19 has raised up a host of challenges for companies, not least around accurate reporting. It is an issue close to Hilary Eastman, CFA’s heart. Eastman is Head of Global Investor Engagement and UK Corporate Affairs Stakeholder Engagement at PwC, and spends much of her time talking to investors about how companies could better report to the market. In these extraordinary times, she says, accurate company reporting will be more challenging than ever.

 


“There are a lot of questions that companies have at the moment, about how they are meant to come up with some of the projections they have in their financial statements, for example for impairment testing, fair values and other areas,” she explains.

She believes that companies will have to make more disclosures about their assumptions, and their thinking, going forwards.

“What’s probably going to be unsettling for companies and for investors and analysts is the way that these assumptions are going to change over time, as new information comes out, which seems to be happening daily. They will be refined and updated accordingly, and I think you might end up seeing some volatility in the financial statements as a result of that. So the explanations from companies about why that’s happening is going to be really important,” she explains.

Another key issue for investors during the pandemic will be how AGMs take place in the coming period. “There is a lot of talk about virtual AGMs, or postponing AGMs, and how that works. One of the things that is really a challenge is the opportunity for shareholders to ask questions of the board and the executive team. Are companies allowing [the AGM] to be done in real time through a webcast, or are they asking for questions in advance, which they then provide a scripted answer to, and no opportunity to follow up on it? I think the way that companies manage the AGM process and try to get input from their shareholders is going to be quite telling,” she points out.

Eastman has spent a great part of her career engaging with investors. She studied Finance at San Diego State University, receiving both her bachelors and master’s degree from the institution, after briefly considering a career in interior design. She graduated in 1998, and started working in the M&A and venture capital arm of a defence company, providing funding to start-ups. She then moved to PwC as an associate in the tax, and then valuations teams, before moving to the UK. After roles at Standard & Poor’s and Duff & Phelps, Eastman joined the International Accounting Standards Board in 2006. 

“One of the things they really liked about my background was that it was so different from everyone else there. They didn’t have anyone who knew about finance and valuation in the same level of detail as I did, so that was quite useful. I ended up working on a project that is now IFRS 13, and having that practical experience was invaluable,” she says. 

In 2013, Eastman began volunteering for CFA UK. She joined the Financial Reporting and Analysis Committee (FRAC). She went on to support the volunteering committee, and also became involved in the society’s Value of the Investment Profession work, focusing on capital allocation. Eastman is now chair of the Professionalism Steering Committee. 

“Right now, the work that we are doing is quite varied. There are many things going on. The IASB has some important projects, one on what the income statement should look like, and to the extent that that changes, that could change analysts’ models completely, so getting the user voice into that debate is very important. Another one they are looking at is goodwill impairment, and some of the disclosures on M&A transactions, because often times information is missing in the accounts, almost as soon as the press release comes out announcing an acquisition. They do the accounting for it, and a year later you can’t find out how that acquisition is doing. So the IASB are working to change that, and that’s a really important project for users to share their views on.”

The work of the committee is varied, however. “The Professionalism Steering Committee gets involved in so many different types of things, whether it is reporting, such as ESG and accounting, or market regulation, or market pricing issues, so it definitely keeps me busy, and I am learning a lot,” she says. 

Eastman also sits on the board of CFA UK. “It’s a very difficult time for everyone, and the uncertainty that we are all facing makes it incredibly difficult, not to mention the health concerns on the personal side of it, which makes it different from other crises that we’ve gone through. One of the things that the Society can do is bring members together, even virtually, to share information. We’ve got twelve thousand members, we can use the power of the membership to bring other people up to speed on how others are dealing with issues,” she says.

And CFA UK’s spirit of volunteerism has continued, despite the social isolation. Eastman points out that, in normal circumstances, with meetings held at lunch time or after work, its sometimes tricky for people to make a meeting. “So when we have meetings or calls now, more people are joining, because when people are sitting at their desks at home, they don’t have to try and find the time to travel to a meeting. It feels like we all just move on to the next meeting. So we are finding that there is more participation in meetings since we’ve been in lockdown,” she says. 

 


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