Producing a company’s annual report and accounts is quite a balancing act.
Whether the finished product is judged to be good, bad or indifferent depends largely on the point of view of the person reading it and what information they are looking for.
So the problem for any company is that many different people read its annual report for many different purposes. For example, building society conversions and public-sector privatisations have contributed to an explosion in the number of small shareholders.
Meanwhile, analysts and fund managers, themselves subject to ever closer scrutiny about their investment performance and policies, are growing more and more hungry for information. On top of all this, regulators are becoming increasingly powerful and demanding about the information they require companies to disclose.
With this growing interest in the business world from all quarters comes increasing attention on the details of annual reports from financial journalists and their growing army of readers eager to devour the acres of newsprint which are now dedicated to business issues.
The company that puts together a report and accounts which meets these conflicting demands will therefore have achieved quite a feat. So the judges for our Business Reports and Accounts award will be looking for a entry providing information about the financial position, performance and financial adaptability of an enterprise which is useful to a wide range of users for assessing the company and making economic decisions.
Any company report filed with Companies House and published between September 1998 and July 1999 is eligible for entry.
The award will be presented to the FD on behalf of the team responsible for putting the report together at Accountancy Age’s glittering awards ceremony at the Natural History Museum on 3 November.
Judges will take into account the usefulness, completeness, relevance, understandability and clarity of information of all financial and non-financial information in the accounts, notes to the accounts and the operating and financial review.
A company’s approach to corporate governance will also be considered.
Pharmaceutical giant Glaxo Wellcome won the category in the last Accountancy Age awards, held in 1996, in a strong field including BP, Reuters, ICI and Coats Viyella, all of which were shortlisted. One of the elements that particularly impressed the judges about the winning entry was the way it handled the merger between Glaxo and Wellcome.
The consolidation frenzy has continued over the last three years, meaning that companies have to explain ever more complex transactions in their annual reports.
Many mergers and takeovers have taken place across national borders, creating presentation challenges not just in language and currency terms, but also in dealing with different sets of accounting standards and varying regulatory regimes.
In addition, FDs also face demands for increased social and environmental reporting. There is growing talk about the ‘triple bottom line’ – financial, environmental and social.
Many companies are also now posting their annual reports on the Internet, and there is talk of the electronic media leading to the eventual death of the traditional annual report.
But whatever form the report of the future may take, the fundamental issues will remain the same.
ACCA financial reporting specialist Richard Martin says: ‘One of the balancing acts is providing clear messages but with sufficient detail, without the detail obstructing the messages.’
He comments that there have been classic cases of companies obscuring important information with detail, particularly with remuneration issues.
The pay packages earned by many directors revealed by annual reports have provided fodder for the media and shocked many shareholders.
John Rogers, director of investment services at the National Association of Pension Funds, agrees that remuneration issues are often obscured in annual reports. ‘Remuneration should be shown in a clear format,’ he says.
Talking about the general aims of an annual report, he adds: ‘The information must be easily understood and should not need extra analysis to be made clear.’
THE SEARCH FOR FINANCE TEAM OF THE YEAR
This year Accountancy Age introduces a brand new category into its awards – Finance Team of the Year. The new category has been introduced to recognise that the success of an organisation’s finance function reflects more than just the work of the finance director, but the work of his or her department.
Open to finance teams in any sector of industry, commerce or public life, the award is intended to recognise professional excellence in financial management.
The judges will be looking for evidence of substantial achievement, and innovation that has generated clear business benefits.
There are many contenders – from teams that have been involved in the implementation of a major reform in the public sector, to teams involved in a major business deal.
Change need not have been forced on the finance team by an outside event.
One that can demonstrate achievement and innovation within the business which has improved the way that it is run stands just a good a chance of winning.
Many accountants are modest types, so those FDs who are unwilling to put themselves forward for FD of the year may feel their team has achieved something notable over the past year which is worthy of recognition.
If you have yet to submit your entry for the Accountancy Age Awards for Excellence – there is still time. We are now accepting entries up to 13 August. So if you want to see your trainee, finance team, large, small or medium-sized firm, public-sector achievement or annual report and accounts applauded at our November gala contact us for an entry form now. You can email your request to us or contact us by telephone on 0171 316 9554 or email email@example.com. Entry is free.
Ceremony: 3 November 1999, Natural History Museum, London
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