Wake-up call over waffle in annual reports

The annual reports from 50 of the world’s most prominent companies have been
ranked by an advertising body that found many fail to communicate adequately.

The Institute of Practitioners in Advertising, a professional media industry
body, released its research into the reporting language of global firms in which
it said many ‘fail to provide enough information or analysis on why their brands
are successful’.

It ranked Reckitt Benckiser, the company behind brands such as Harpic cleaner
and Veet personal care products, as a particularly notable example of how a
brand can be ‘brilliantly linked’ to a company’s overall strategy.

It found Marks & Spencer’s report could better link its data to its
strategy, while Tesco needed ‘to use a mixture of data, and genuine consumer
insight’, to explain how it has met its customers’ needs.

The financial crisis has shone the spotlight on ‘narrative reporting’, with
regulators increasingly interested in how companies communicate to stakeholders
in annual reports.

The increasing complexity of financial instruments, and investors’ inability
to grasp the underlying risks, was thought to be a factor in the financial
crisis.

In June, the Financial Reporting Council released a discussion paper, ‘Louder
than Words’, on the subject and, in the same month, the International Accounting
Standards board released an exposure draft on ‘management commentary’.

Hamish Pringle, the IPA’s director general, said he hoped his report would
provide ‘insights, hints and tips’ for companies preparing annual reports.