Investors have always put a high price on financial information, as it provides vital clues about a company's market backdrop, growth prospects and value. But $100bn (£63.7bn) might strike even the greatest devotee of disclosure as excessive. That's how much investors added to the market capitalisations of both Google (US:GOOG) and Amazon (US:AMZN) after they vowed to improve transparency.
Google's shares have rallied since finance chief Ruth Porat, who joined this year, promised to improve the search and advertising titan's reporting practices. They also climbed 4 per cent after management said it would separate the core search and advertising businesses from more speculative ventures, creating eight divisions within an 'umbrella' company called Alphabet. Investors' strong response is likely due to pent-up frustration with Google, which has significantly altered its business without updating its accounting policies. It has tacked on businesses such as video-streaming platform YouTube, mobile operating system Android, Chrome laptops, Nexus smartphones and tablets, and Nest smoke alarms and thermostats. And those are the established offerings; its 'moonshot' projects include self-driving cars, humanoid robots and spreading internet connectivity via hot air balloons. Shareholders are undoubtedly keen to see the sales and profits of the main business, as well as the costs of the group's experimental operations.
It's a similar story at Amazon (US:AMZN), which has branched out from selling books and CDs to renting out data storage, streaming TV shows and films, live-streaming video games, and making set-top boxes, smartphones and tablets. Investors cheered the revelation that its cloud-computing business, Amazon Web Services, posted $6bn in annual sales at an operating margin of 21 per cent in 2014.
Other companies have drawn investors' ire for withholding key details. Apple (US:AAPL) breaks out its sales across five territories and product lines, and reports how many iPhones, iPads and Macs it sells. But it bundles its latest offering, Apple Watch, with Beats by Dre headphones and phone cases in 'other products'; analysts can only hazard a guess as to whether the wearable computer has been a success. And revenues from the group's new Apple Pay and Apple Music services are likely to fall under 'services' - along with ebooks, apps and iTunes purchases - for the foreseeable future.
Pearson (PSON), meanwhile, has come under fire for not disclosing financial details for the FT Group, which houses the Financial Times and Investors Chronicle and was recently sold to Japanese publisher Nikkei. The education giant only revealed that global revenues "grew slightly"; it didn't disclose print and digital sales or advertising and circulation revenues.
Readers may wonder what qualifies as high-quality reporting, and which businesses are bastions of the practice. Accounting giant PwC points to companies that provide better - not more - information, back up qualitative statements with hard data, and, if relevant, compare performance with peers. It celebrates groups that provide insights into their business models, activities and progress against a clear long-term strategy. And it cheers those that lay out the short-term actions and resources needed to reach their goals, their dependency on key resources, suppliers and customers, and how they assess and mitigate risks. It singled out Vodafone (VOD) for the FTSE 100 award in 2014; the telecoms company offered plenty of juicy, relevant details in its full-year results. For instance, management said it was 63 per cent through the mobile build element of its Project Spring investment programme, 4G coverage in Europe had reached 72 per cent, and the group had 115.5m data customers in emerging markets. It also broke out sales and cash profits from seven service lines in eight localities.
Similarly, the Institute of Chartered Secretaries and Administrators (ICSA) doles out awards for the best annual reports published by FTSE 100, FTSE 250 and small-cap companies. GlaxoSmithKline (GSK) snagged the prize in 2014, reflecting the pharmaceutical mammoth's detailed responses to allegations of fraud in China. The report also gave ICSA a "strong picture" of how the group operates and creates value, clearly explained its business model and key performance measures, and provided useful market context. Lonmin's submission (LMI), meanwhile, was described as "passionate", honest and showed management was "trying to do the right thing". And Vitec's report was lauded for giving a "real sense of culture", including graphs and clearly stating the group's strategic focus.
