Standards board lambasts report clutter

CUTTING CLUTTER is at the heart of a new report by the Accounting Standards Board, and stakeholders have been invited to comment on its findings.

The Accounting Standards Board said irrelevant information makes annual reports confusing and off-putting for users. Its study, Cutting Clutter: Combating clutter in annual reports, focuses on using reports to deliver salient points about business performance and long-term prospects.

It acknowledges the perils of issuing further guidelines when the ultimate objective is simplifying the reporting process, and insists that the study should be used as a guide rather than a checklist.

The three-pronged publication offers practical aids for reducing clutter, shows what clutter-free disclosures might look like, and suggests factors to consider when planning annual reports.

Everyone is responsible for the ever-expanding annual reports, it argues, saying there are a number of behavioural factors that influence people when drawing them up.

Fear of challenge, reluctance to remove information contained in previous reports, and the temptation to include general information that paints the company in a positive light can all stretch annual reports across unnecessary pages.

The ASB singles out a number of official bodies, saying their approach encourages excessive disclosure. The International Accounting Standards Board’s standpoint, that “immaterial information does not affect a user’s decision”, is criticised. Similarly, the ICAEW comes under fire for its guidance on materiality, which “currently focuses on what to include rather than what could be taken out”.

Detailed information that is immaterial to understanding a business – such as some aspects of corporate social responsibility – should be moved to company websites. Report writers should consider minimising clutter at all stages, and users and preparers alike must demand only the relevant information be included, said the ASB.

Stakeholders have until 30 September to comment on the report, and a follow-up will take place in autumn.

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Fiona Westwood of Smith and Williamson.