RegulationAccounting StandardsView from the outside: annual reports – what’s the point?

View from the outside: annual reports - what's the point?

I was talking to a finance director this week who had just eagerly devoured CIMA’s annual report

Not literally, you understand, though had he done so I would not have been
more surprised.

Normally he wouldn’t have devoted time to communication from his institute,
but something persuaded him to put his day job to one side for a moment.

It might have been that CIMA is doing something right in its communication
with members – not a practice at which the institutes have proved themselves
particularly adept in recent years. More likely, it was the accompanying threat
of another rise in membership fees that led him to read on.

In this case, he saw value in the report. But, in general, is it worth
bothering to read an annual report these days? Too many are gimmicky in design.
I remember with no fondness the year when, as chairman of the Accountancy Age
Awards judging panel, I was forced to endure a handful of corporate annual
reports that were issued on CD.

But new research by communications agency Black Sun provides some
encouragement. And, somewhat perversely, the research suggests that the
scrapping of the operating and financial review (something that would have
forced companies to disclose more discursive information) has persuaded more to
be forthcoming.

More companies, the review of 50 FTSE 100 annual reports suggests, are
focusing strategy. Some 95% now use the annual report to discuss their corporate
strategies, up from 75% last year. And business objectives are provided by 40%,
up from 16% 12 months ago.

It’s clear that despite – or perhaps because of – the scrapping of the OFR,
enhanced narrative reporting will become increasingly important in the years
ahead. Trade minister Alun Michael may have said recently that the scrapping of
the OFR will save business £33m even after its proposed replacement, the
Business Review, bites. But companies still appear intent on disclosing more.

As Black Sun director of corporate reporting Sallie Cook Pilot, concludes:
‘On this journey to greater transparency and better disclosure there are a
number of companies that are clearly beginning to differentiate themselves.’

That suggests good old fashioned competition – market forces within the
potential investor community, if you like – is even more important than cost
savings.

For more views go to Damian Wild’s blog at
accountancymatters.accountancyage.com

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