Quarterly cash flow reporting – is it useful?

Abstract

In contrast to requirements in many overseas jurisdictions, there is no general mandate for companies listed in Australia to produce quarterly financial reports. Instead, Australian regulators have adopted half-year financial reporting supplemented by continuous reporting of price-sensitive information. One exception is the Australian Stock Exchange (ASX), which requires certain types of entities to report quarterly. For many years mining exploration companies have been required to lodge quarterly cash flow and activities reports. More recently, the ASX extended quarterly cash flow reporting to companies classified as commitments test entities (CTEs) in order to address governance issues associated with these higher-risk entities. Previously, such entities were generally prohibited from ASX listing. This article analyses the evolution of this little-known new quarterly reporting rule over its first four years of operation; evaluates quarterly cash flow reporting as a monitoring mechanism for what has grown to be a significant number of small-cap companies; and concludes with suggestions for improvement.