Annual reports are dreadful says auditor

The Accounting Standards Board (ASB) published the results of its review of narrative reporting on 29 October, and its release was trailed by separate reports from PricewaterhouseCoopers (PwC) and Deloitte.

PwC “recognise that reporting is not made easy by the regulatory demands imposed on all companies today, but sadly too many reports display the dead hands of compliance and the editorial committee”. In an article published in Accountancy Age, David Phillips, PwC’s senior corporate reporting partner, “believes a box ticking culture has degraded some annual reports to the point where they are, “legally compliant, but, as a communication document, dreadful”. PwC accuses some companies of paying “lip service” to sustainability reporting. On remuneration, Phillips states “Some reports can be a bit of a data dump whereas some reports… have gone out of the way to help understand how individuals are paid.”

Deloitte notes that UK listed companies have to contend with disclosure demands that are “diverse, disjointed, different, and disfunctional”. Deloitte Audit Partner Isobel Sharp is quoted in Compliance Week as saying “Businesses would be helped if there was a single authoritative document which brought together the requirements in a complete, logical, and orderly manner”.

The ASB found that “the best reporters continue to evolve their narrative reporting and also did well across a number of content areas. Overall, most companies provided good content in relation to their:

  • financial performance and position;
  • financial key performance indicators (KPIs); and
  • articulation of strategy”.

It noted that some companies continue to struggle to meet some of the requirements, notably the communication of principal risks and non-financial KPIs. In addition, the ASB found that companies are having difficulty with some of the new enhanced business review requirements:

  • only 38% of companies provided discussion of trends and factors that was relevant and forward looking
  • it was unclear whether 52% of the sample specifically addressed the requirement to discuss contractual and other arrangements … for 12% it was clear they did not.

The review found that risk reporting and CSR sections contained the most clutter, which distracted from important information in these sections.

Further Reading

PricewaterhouseCoopers: http://pwc.blogs.com/corporatereporting/

Deloitte: A telling performance Surveying narrative reporting in annual reports

Compliance Week: http://www.complianceweek.com/blog/glimpses/2009/10/23/uk-narrative-reporting-regime-dysfunctional-deloitte/

Accounting Standards Board – Press Release

Leave a Reply