The Term ‘Non-financial Information’ – A Semantic Analysis of a Key Feature of Current and Future Corporate Reporting

ABSTRACT

Accounting and corporate reporting can be seen as a language for specific purposes. Such a language requires the use of terms and concepts with a precise and commonly shared meaning to allow effective and efficient communication. We analyze the term ‘non-financial information’, which has become a part of mandatory corporate reporting within the European Union (EU) through recent regulatory actions. Our analysis is based on a survey of the theoretical and empirical literature, on the rational of semantic theory, as well as on a questionnaire survey. The clear finding is that, up to now, neither a common meaning nor a generally accepted definition of ‘non-financial information’ exists. We derive from the applied theoretical concepts that this situation negatively impacts the efficiency and effectiveness of corporate communication. Against this background we discuss several venues that might help to overcome this deficiency like issuing a mandatory guideline or changing the terminology.

Keywords:

• non-financial information
• language
• corporate reporting
• sociolinguistic
• CSR

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Another stream of literature compares the characteristics of accounting rules and practices to characteristics of general language. For example, Li (1963), Jain (1973) and Belkaoui (1978) Whereas the theory applied in this paper refers to accounting language as a highly specialised ‘dialect’ (Baskerville & Evans, 2011).

2 Without mentioning the term ‘LSP’, Mills (1989) and Riahi-Belkaoui (1995) lays the foundation for this view. While Riahi-Belkaoui shows that this sociolinguistic assumption is applicable to accounting, Mills (1989, p. 21) states that ‘with other professional fields of knowledge, accounting in both its theory and practice is […] dependent on a specialized vocabulary or terminology’.

3 A similar statement was made by Llewellyn and Milne (2007, p. 806): ‘Accountants following particular codes to represent assets and liabilities […] Only the professional élite can encode, in the sense of setting or amending the codes.’

4 This model can be compared to the framework to study LSP that was set up by Cabré Castellví (2003).

5 The requirement of an unambiguous and standardized meaning of a term stems from the controversial but still predominant General Terminology Theory (GTT) while the precise meaning achieved by definition or discussion is a requirement formulated by the Communicative Theory of Terminology the likely successor of GTT (see Faber, 2012).

6 Figure 1 explains the model by using an accountant as a sender and an environmental activist as a receiver of the term ‘market share’. As indicated, they do have different contexts and cotexts and might code the term differently as ‘financial’ and ‘non-financial’ information. As explained later, all this most likely contributes to an ineffectiveness of the communication.

7 Only a few communication types, like the letters to shareholders, tend to be written in a less technical language, as they are aimed at a broader group of users (Dragsted, 2014).

8 We argue that these concepts and instruments are no LSP by themselves. Instead, their creation was influenced by other LSPs such as natural sciences.

9 There was already a quite intensive discussion about CSR in the context of corporate reporting in the 1970s (see, e.g., ASSC, 1975; Burchell, Clubb, & Hopwood, 1985; Haller, 1997; Haller et al., 2016).

10 For instance, some types of intellectual capital (e.g. development costs) meet the definition of intangible assets according to national regulation or international standards (IAS 38) and must or may be recognized on the face of the balance sheet. Furthermore, some aspects of this concept are defined by the ‘Jenkins Committee’ report (e.g. resource provider satisfaction) (AICPA, 1994).

11 Furthermore, the research intensity is geographically heterogeneous: US researchers have published only a few papers whereas the majority of publications are written by their European counterparts, especially Scandinavian counterparts, that form the Center of Intellectual Capital research (Guthire, Ricceri, & Dumay, 2012).

12 This situation is shown in Figure 1 where the sender has an accounting context and the receiver an environmental activist context leading to different cotexts in mind. Thus, the receiver interprets the term ‘market share’ as ‘financial information’ and the sender as ‘non-financial information’ (see Figure 1 in Section 2).

13 Only the reporting of items mentioned in the ‘Jenkins Committee’ report from 1994 seems somewhat congruent among countries with similar jurisdictions like Australia and Canada. Furthermore, multinational companies tend to report these items congruently since specific national cultures might have less influence (Robb et al., 2001).

14 They were announced for the beginning of December 2016; however, have not come out yet.

15 The results of a case study that was carried out by the Danish Commerce and Companies Agency can serve as a show case for a heterogeneous and confusing communicational outcome. The study shows that the legal introduction of required disclosures on the ‘policies of the business on social responsibility’ in the management review (Danish Minister for Economic and Business Affairs, 2008; Johansen & Plenborg, 2013) has led to a very heterogeneous reporting situation two years after the enacting of the law. According to the survey, 13% of the companies issued no report, 16% of the companies used the UN Global Compact and another 16% used the GRI. The remaining 45% applied no standards. The guidelines of the Danish Commerce and Companies Agency were used by approximately 50% of the respondents as a basis for reporting. Regarding the quality of the reports, the survey revealed that 6% of the companies disclosed no CSR information and 15% of the companies disclosed inconsistent CSR information (Danish Commerce and Companies Agency, 2011).

16 The questionnaire is available upon request.

17 However, the test with the questionnaire shown in Appendix II reflects that the small sample of department members was able to categorize almost all the indicators on the basis of definition 3.

18 For a contrary view, see Alexander (2006) and Nobes (2006).