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Setting the benchmark in corporate integrity

Reducing annual report clutter

The presence of clutter in an annual report actively detracts from its usefulness to both shareholder and investor alike

Clutter often undermines the intention of a report in that it inhibits or obscures the understanding of a business and its present operations.

As opposed to readily cutting masses of information, many governments and organisations such as the Financial Reporting Council (FRC) instead demand for an entire restructuring of the way in which reports are compiled.

Regulations
Given that financial health is often what attracts investors, financial detail is often the lengthiest component of a report. Graham Holt of the ACCA states that: “It is not the length of the disclosure of accounting policies that is in itself problematic, but the fact that new or amended policies can be obscured in a long note running over several pages”. The reasoning for this ‘kitchen sink’ approach can, in part, be attributed to bodies such as the ICAEW, who focus more so on what should be included as opposed to what could be excluded in a report.

In effect, there are just too vast an array of requirements imposed by laws, regulations and financial reporting standards. If clutter is to be better reduced then regulators and standard setters are to recognise their role in determining the content of annual reports, and to subsequently ensure a greater distance from the all-inclusive expectations of present day.

Visuals

Graphic designer Sarah Pead – having worked primarily in publication design – questions the use of visuals in annual reports, posing the possibility of “reports where the use of charts, numbers and data are presented not as points plotted on stale x-axis and y-axis, but as works of art… where digital usability and interactivity is planned out in such a way that the user encounters an experience instead of just typically boring data”. Whereas many annual reports are laid out as an achingly practical log of data, it would perhaps be preferable to “visually display that stat of XYZ in a way that is engaging and helps transform the viewer’s overall perception of the organization.”

Over disclosure

The threat of criticism or litigation is of primary concern to those compiling annual reports. ACCA maintain that: “The risk of future litigation may outweigh any benefits from eliminating catch-all disclosures. As a result, preparers of annual reports are likely to err on the side of caution and include more detailed disclosures than strictly necessary to avoid challenge from auditors and regulators”. Disclosure is often perceived as the safest option and is commonly taken as the default position by many.

Readerships of annual reports have expanded through the years to include employees, stakeholders, unions, suppliers, customers, etc. as such causing for the angles of criticism to be both wider and more varied. If annual reports are to become both more concise and accessible, companies are to consider that although their readership may be wider; this is not to say they are to cater for all.

 

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