Narrative reporting impresses investors
Narrative reporting is becoming as important as traditional financial items in company reports when it comes to making investment decisions, writes.
Link: Disclosure of non-financial data gets PwC boost
A report from the Institute of Chartered Accountants of Scotland highlights the growing significance of voluntary disclosures, although it says companies themselves still underestimate the value of such information.
The study, entitled Voluntary Annual Report Disclosures: What Users Want, asked different groups who deal with company accounts to rank items that might be included in reports in order of their usefulness.
While the report found traditional financial items, such as earnings and cashflow, still came top, non-financial items in areas such as business objectives and strategy, management discussion and company background were considered almost as significant.
Vivien Beattie, director of research at ICAS and a co-author of the report, said: ‘Narrative reporting is becoming more important. While financial items are still critical they are not sufficient for those making investment decisions.’
Beattie added that companies were not putting enough thought and care into this side of reports because they do not yet understand the importance investors place on these measures.
‘Findings like these should help the ASB to provide detailed guidelines to companies on what should be offered in their annual reports,’ said Beattie. ‘Until you do the research you don’t know for certain what users want, and there were some interesting results.’