The Business Review and AIM

In a world where financial reporting has become increasingly complex, the Business Review legislation provides an opportunity for AIM companies to differentiate themselves and boost investor confidence. However, despite the Business Review providing a framework to communicate clearly in a highly competitive market for capital, AIM companies are not taking full advantage of it, according to the latest PricewaterhouseCoopers report.

The report 'The Business Review and AIM' reviews how companies listed on AIM, for whom the Business Review is now mandatory, have been complying with the legislation. Published in March 2007, it looks at the quality of narrative reporting in their annual reports both before and after the Business Review came into effect. In addition, the report highlights areas where AIM companies could be looking to improve and strengthen their Review.

The report shows that while Main Market companies are increasingly recognising the benefits generated by greater transparency of reporting, AIM companies do not appear to be maximising this opportunity to the same extent. In what is a highly competitive and volatile market, the report shows that there is real scope for AIM companies to present investors with a clearer picture of the performance and future direction of the company. According to the research, only 54% of AIM companies gave investors a view of the business and market in which the company operates, compared with 100% of their Main Market counterparts.

The report focuses on four key areas of information covered in the Business Review: the business environment, company strategy, key performance indicators (KPIs) and identification of principal risks and uncertainties. Whilst only two of these areas, KPIs and principal risks and uncertainties, are explicit requirements of the Business Review, the report strongly recommends that a description of the business environment and strategy are critical in order to put KPIs and risk into context.