5 ms·

The problem with reporting often is that the reports must each be audited (which is time-intensive and expensive), and any errors subject the companies to class

by nickff 7mo ago

The problem with reporting often is that the reports must each be audited (which is time-intensive and expensive), and any errors subject the companies to class-action lawsuits (which only ever benefit the lawyers, but that is a separate matter). I would also prefer more frequent reports, but only if they were less burdensome and risky.

runako 7mo ago
Longer periods between audited (aka "accurate") results will lead to compounding errors. Fewer people at the company will have a clear idea of how the company is doing. Audits are like CI for finances.
- nickff 7mo ago
  I agree that would be preferable if reporting were less expensive and (legally) risky, and what you're describing is definitely closer to the original intent of the rule (that of giving investors the information available to management), but it would make being a public company even more burdensome than it already is, and the number of public corporations is already in decline.
  - HeWhoLurksLate 7mo ago
    how much of that decline is due to mergers vs failing vs new private companies being formed instead?
  - runako 7mo ago
    > it would make being a public company even more burdensome than it already is Every company doesn't have to be public. The US taxpayer underwrites US securities markets, and companies that trade on our public markets have access to some of the deepest pools of low-cost liquidity in the world. But companies are obviously free to list elsewhere. > the number of public corporations is already in decline. Separate problem. IIRC HBS studied this and basically the issue is we stopped enforcing our anti-competition laws a while back[1]. So we end up with a fraction of firms that each sector would financially support. Both because it creates giants that are much harder to compete against, and because it allows mergers between competing firms that AFAIK could be deemed illegal under existing laws. 1 - See, for example the Robinson-Patman Act, whose dormancy allows big box retailers to exist. This law has never been repealed.
    - Karrot_Kream 7mo ago
      When companies stay private longer, private capital stays tied up for longer, decreasing public liquidity and keeping bad private investments afloat for longer. Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees. Right now badly performing companies can limp along tying up liquidity and locking up employee equity only to head to an eventual bankruptcy or bad IPO.
      - throw0101c 7mo ago
        > Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees. That's not how I remember it. I remember lots of publicly traded company shares being gobbled even though their business plans[1] were essentially: 1. Collect underpants 2. ? 3. Profit "Going for marketshare" and not making a profit was still popular as recently as Uber/DoorDash/etc. Cisco still (AIUI) hasn't reached back to is DotCom peak. Are the current multiples of many tech stocks sensible? [1] https://en.wikipedia.org/wiki/Gnomes_(South_Park) https://en.wikipedia.org/wiki/Gnomes_(South_Park)
        Karrot_Kream 7mo ago
        I'm having a hard time responding to someone who's using a South Park episode as a discussion point. Like how can I debate a point made by a show that makes content reacting to the popular perception of certain ideas? That's like 2 levels removed from the actual true details. Anyway the difference now is that those companies still exist they just take round after round of private investor capital and the employees are offered shares that will never be tradable. Were those businesses would go bankrupt in a few years before now they can take 5-10 years. Time value of money being a thing, your money will be locked up for longer in a bad investment than it would on the public markets.
        7mo ago
throw0101c 7mo ago
Perhaps the auditing needs to be done on the workflow process and once the automated code is in place there needs to be a traceable chain of modifications to it that need to be justified. The "audit" certifies a certain hash of a repo that produces known-good results, and if you use a different commit in that repo you have explain in an SEC filing why you modified things. Basically reproducible builds for financial results: * https://en.wikipedia.org/wiki/Reproducible_builds https://en.wikipedia.org/wiki/Reproducible_builds
- 3eb7988a1663 7mo ago
  I know a few accountants, and I do not think this is possible. There is an incredible amount of manual adjustments that have to occur to get the books in order. I suspect the official process is 100% GAAP approved and great, but the messy reality has thousands of tweaks that were massaged all over the place to correct for one thing or another.
  - throw0101c 7mo ago
    Yes, I know some accountants as well, as well as bookkeepers who have to do adjustments for things like 'timecards' and punching-in and -out: there's all sorts of adjusting that needs to be made. But any "mistakes" that are made are simply corrected the next reporting period (whether that's monthly, fortnightly, weekly, or daily) in this more-frequent proposal. The 'crunches' that occur at quarter/period-end are there because there is so much attention put on those reports because they're so infrequent. If the sampling rate is higher then errors are corrected that much sooner. The reports are generated on the books in the state that they currently are in on a monthly/fortnightly/weekly/daily basis, and any adjustments will be "fixed" in the next reporting period. The reason why there's so much pressure to get them "correct" now is because of the (relatively) infrequent reporting. If you know that things will be 'sorted out' in a fortnight (two weeks), or whatever, there's less pressure now to get them "right". There will be an expectation of less perfecttion and more corrections and better 'smoothing' due to the higher 'sampling rate'.
  - sowbug 7mo ago
    Isn't that the kind of toil that tends to get automated away with CI/CD?
hatsix 7mo ago
The reports don't have to each be audited... reduce the auditing to twice a year, increase reporting to monthly... if your report requires remediation, you her bumped to quarterly audits
- nickff 7mo ago
  The company would probably be sued if there were any issues in one of the monthly reports; the money for the plaintiff lawyers is just too appealing. I think monthly 'informal' reports with some legal protections to allow for inaccuracies and inconsistencies, with biennial 'formal' reports would be wonderful. That said, I think allowing companies to select an appropriate reporting interval might be best.
  - runarberg 7mo ago
    Feels like a first world problem. If your company cannot afford to output accurate reports every month, maybe it shouldn’t be a company at all.
    - gzread 7mo ago
      Shouldn't be a public company, at least. You can squander your own money as you like.
    - nickff 7mo ago
      Do you have any sources to back up your feelings? I’m basing my comments on what I’ve read about the matter from a variety of former public company CEOs, CFOs, and COOs.
      - runarberg 7mo ago
        I am coming to this from a perspective of a worker who used to get quarterly options of the public company I worked for, and I just cannot for the life of me sympathize with a company complaining that it can only afford to gather the information to calculate the worth of the stocks they are paying me in two times a year. I don‘t care how much it costs them. If you are gonna be paying and trading in stocks, I expect you to do the work required.
irjustin 7mo ago
I'm generally with the report often camp. It forces automation all the way down even the auditing.
DesaiAshu 7mo ago
You could report every month and audit every 6 months
otterley 7mo ago
The reason for strong auditing and personal attestation is because left to their own devices, some companies will produce bullshit and hoodwink investors. Blame Enron. https://www.britannica.com/topic/Sarbanes-Oxley-Act https://www.britannica.com/topic/Sarbanes-Oxley-Act Like the building and electrical code, these regulations were written in blood.
- throw0101c 7mo ago
  > The reason for strong auditing and personal attestation is because left to their own devices, some companies will produce bullshit and hoodwink investors. Blame Enron. Except Enron's results were audited. By (now defunct) Arthur Anderson: * https://en.wikipedia.org/wiki/Enron_scandal https://en.wikipedia.org/wiki/Enron_scandal * https://en.wikipedia.org/wiki/Arthur_Andersen#Collapse https://en.wikipedia.org/wiki/Arthur_Andersen#Collapse The auditing already existed and didn't stop Enron (or WorldCom; see also the silliness of GE under Jack Welch). Sure SOx added more rules, but it's not like folks were flying without a net before.
  - 9cb14c1ec0 7mo ago
    Technically the auditing already existed, but functionally it didn't because Enron could bully Arthur Andersen into getting the results they wanted, or just ignore results they didn't like.
balderdash 7mo ago
In the us, quarterly financials are not audited, only annual financials
ezfe 7mo ago
Wouldn't the auditing be proportionally easier with less data in each report?

by nickff 7mo ago

runako 7mo ago

Longer periods between audited (aka "accurate") results will lead to compounding errors. Fewer people at the company will have a clear idea of how the company is doing. Audits are like CI for finances.

nickff 7mo ago
I agree that would be preferable if reporting were less expensive and (legally) risky, and what you're describing is definitely closer to the original intent of the rule (that of giving investors the information available to management), but it would make being a public company even more burdensome than it already is, and the number of public corporations is already in decline.
- HeWhoLurksLate 7mo ago
  how much of that decline is due to mergers vs failing vs new private companies being formed instead?
- runako 7mo ago
  > it would make being a public company even more burdensome than it already is Every company doesn't have to be public. The US taxpayer underwrites US securities markets, and companies that trade on our public markets have access to some of the deepest pools of low-cost liquidity in the world. But companies are obviously free to list elsewhere. > the number of public corporations is already in decline. Separate problem. IIRC HBS studied this and basically the issue is we stopped enforcing our anti-competition laws a while back[1]. So we end up with a fraction of firms that each sector would financially support. Both because it creates giants that are much harder to compete against, and because it allows mergers between competing firms that AFAIK could be deemed illegal under existing laws. 1 - See, for example the Robinson-Patman Act, whose dormancy allows big box retailers to exist. This law has never been repealed.
  - Karrot_Kream 7mo ago
    When companies stay private longer, private capital stays tied up for longer, decreasing public liquidity and keeping bad private investments afloat for longer. Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees. Right now badly performing companies can limp along tying up liquidity and locking up employee equity only to head to an eventual bankruptcy or bad IPO.
    - throw0101c 7mo ago
      > Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees. That's not how I remember it. I remember lots of publicly traded company shares being gobbled even though their business plans[1] were essentially: 1. Collect underpants 2. ? 3. Profit "Going for marketshare" and not making a profit was still popular as recently as Uber/DoorDash/etc. Cisco still (AIUI) hasn't reached back to is DotCom peak. Are the current multiples of many tech stocks sensible? [1] https://en.wikipedia.org/wiki/Gnomes_(South_Park) https://en.wikipedia.org/wiki/Gnomes_(South_Park)
      - Karrot_Kream 7mo ago
        I'm having a hard time responding to someone who's using a South Park episode as a discussion point. Like how can I debate a point made by a show that makes content reacting to the popular perception of certain ideas? That's like 2 levels removed from the actual true details. Anyway the difference now is that those companies still exist they just take round after round of private investor capital and the employees are offered shares that will never be tradable. Were those businesses would go bankrupt in a few years before now they can take 5-10 years. Time value of money being a thing, your money will be locked up for longer in a bad investment than it would on the public markets.
        7mo ago

throw0101c 7mo ago

Perhaps the auditing needs to be done on the workflow process and once the automated code is in place there needs to be a traceable chain of modifications to it that need to be justified. The "audit" certifies a certain hash of a repo that produces known-good results, and if you use a different commit in that repo you have explain in an SEC filing why you modified things. Basically reproducible builds for financial results: * https://en.wikipedia.org/wiki/Reproducible_builds https://en.wikipedia.org/wiki/Reproducible_builds

3eb7988a1663 7mo ago
I know a few accountants, and I do not think this is possible. There is an incredible amount of manual adjustments that have to occur to get the books in order. I suspect the official process is 100% GAAP approved and great, but the messy reality has thousands of tweaks that were massaged all over the place to correct for one thing or another.
- throw0101c 7mo ago
  Yes, I know some accountants as well, as well as bookkeepers who have to do adjustments for things like 'timecards' and punching-in and -out: there's all sorts of adjusting that needs to be made. But any "mistakes" that are made are simply corrected the next reporting period (whether that's monthly, fortnightly, weekly, or daily) in this more-frequent proposal. The 'crunches' that occur at quarter/period-end are there because there is so much attention put on those reports because they're so infrequent. If the sampling rate is higher then errors are corrected that much sooner. The reports are generated on the books in the state that they currently are in on a monthly/fortnightly/weekly/daily basis, and any adjustments will be "fixed" in the next reporting period. The reason why there's so much pressure to get them "correct" now is because of the (relatively) infrequent reporting. If you know that things will be 'sorted out' in a fortnight (two weeks), or whatever, there's less pressure now to get them "right". There will be an expectation of less perfecttion and more corrections and better 'smoothing' due to the higher 'sampling rate'.
- sowbug 7mo ago
  Isn't that the kind of toil that tends to get automated away with CI/CD?

hatsix 7mo ago

The reports don't have to each be audited... reduce the auditing to twice a year, increase reporting to monthly... if your report requires remediation, you her bumped to quarterly audits

nickff 7mo ago
The company would probably be sued if there were any issues in one of the monthly reports; the money for the plaintiff lawyers is just too appealing. I think monthly 'informal' reports with some legal protections to allow for inaccuracies and inconsistencies, with biennial 'formal' reports would be wonderful. That said, I think allowing companies to select an appropriate reporting interval might be best.
- runarberg 7mo ago
  Feels like a first world problem. If your company cannot afford to output accurate reports every month, maybe it shouldn’t be a company at all.
  - gzread 7mo ago
    Shouldn't be a public company, at least. You can squander your own money as you like.
  - nickff 7mo ago
    Do you have any sources to back up your feelings? I’m basing my comments on what I’ve read about the matter from a variety of former public company CEOs, CFOs, and COOs.
    - runarberg 7mo ago
      I am coming to this from a perspective of a worker who used to get quarterly options of the public company I worked for, and I just cannot for the life of me sympathize with a company complaining that it can only afford to gather the information to calculate the worth of the stocks they are paying me in two times a year. I don‘t care how much it costs them. If you are gonna be paying and trading in stocks, I expect you to do the work required.

irjustin 7mo ago

I'm generally with the report often camp. It forces automation all the way down even the auditing.

DesaiAshu 7mo ago

You could report every month and audit every 6 months

otterley 7mo ago

The reason for strong auditing and personal attestation is because left to their own devices, some companies will produce bullshit and hoodwink investors. Blame Enron. https://www.britannica.com/topic/Sarbanes-Oxley-Act https://www.britannica.com/topic/Sarbanes-Oxley-Act Like the building and electrical code, these regulations were written in blood.

throw0101c 7mo ago
> The reason for strong auditing and personal attestation is because left to their own devices, some companies will produce bullshit and hoodwink investors. Blame Enron. Except Enron's results were audited. By (now defunct) Arthur Anderson: * https://en.wikipedia.org/wiki/Enron_scandal https://en.wikipedia.org/wiki/Enron_scandal * https://en.wikipedia.org/wiki/Arthur_Andersen#Collapse https://en.wikipedia.org/wiki/Arthur_Andersen#Collapse The auditing already existed and didn't stop Enron (or WorldCom; see also the silliness of GE under Jack Welch). Sure SOx added more rules, but it's not like folks were flying without a net before.
- 9cb14c1ec0 7mo ago
  Technically the auditing already existed, but functionally it didn't because Enron could bully Arthur Andersen into getting the results they wanted, or just ignore results they didn't like.

balderdash 7mo ago

In the us, quarterly financials are not audited, only annual financials

ezfe 7mo ago

Wouldn't the auditing be proportionally easier with less data in each report?