Annual reports are important to stakeholders and give them a clear picture of a company's accounts and plans for development. But a survey shows that reports are becoming more complex and lengthy.
According to the Association of Chartered Certified Accountants (ACCA), corporate reports are being held back by confusion over their different audiences, their complexity and lack of timeliness.
The ACCA report, entitled: 'Reassessing the Value of Corporate Reporting', shows there is a need for a greater focus on forward-facing plans, risk management and effective integration of these and other issues into corporate reports in a more coherent way.
Ian Welch, head of policy at ACCA, says that for all the concerns that stakeholders express about corporate reporting, the survey strongly suggests that the annual report has not diminished in its significance for investors and other stakeholders. 'In fact, the annual report seems to have become more important since the financial crisis, with users reviewing reports more carefully than ever. However, confusion and complexity has hamstrung reports to an extent; they could be much better than they are. Corporate reports are still documents that add value for stakeholders, but investors should be positioned as the most important audience for the report,' Welch says. ACCA surveyed 500 investors, capital providers, suppliers, customers and people preparing reports in Britain, the United States and Canada. It found that 50 per cent of respondents named the annual report as their primary source of information about a company; 41 per cent said the corporate report was an easy way to assess information about a company; 48 per cent said too much promotional material crept into reports; and 47 per cent thought that reports were too long.
ACCA also asked what other information stakeholders would like to see in reports. Some 71 per cent of respondents thought companies should report more on potential risks that could affect their performance; 70 per cent said the most pressing issue was how they intended to manage or mitigate key risks; and 59 per cent said the inclusion of social and environmental data through an integrated report would add value.
Welch says reports can add real value for businesses and investors. 'But, as the survey shows, there are some real issues in today's reporting. Reports need to be simplified, need to be written with investors in mind, and need to be more forward-looking and evidently risk-aware. Hopefully, the survey provides an encouraging backdrop against which regulators, standard-setters and companies can go about simplifying, clarifying and adding more value to corporate disclosures,' he says.
