Aiming for clarity in annual reports

Anne-Marie Chisnall | June 21, 2015

Think of a category of documents that’s invariably clear and concise.

We wouldn’t mind betting that ‘annual reports’ didn’t figure in your list. Yet annual reports need to be clear so that investors and stakeholders can quickly get the information they need to confidently make decisions.

Image, table of figures.

Is your annual report clear and concise? Image by Reyner Media / CC BY 2

Traditional financial reports miss the mark

Liz Koh makes a compelling case for clearly written annual reports in her recent article Better reporting for investors. She wonders if investors even bother to read annual reports. The increasingly complex business environment and changes in the accounting and regulatory environment are contributing to more complex reporting of performance information. Fortunately help is at hand. Chartered Accountants Australia and New Zealand (CAANZ) has released a paper called Noise, Numbers and Cut-Through. The paper asks:

Are traditional financial reports still a valid part of organisational communication and accountability? Or has the financial report become an impenetrable collection of numbers and words, prepared only for compliance purposes, and only understood by a few technical elite? Is the financial report keeping up with the increasingly complex demands of businesses in a timely manner?  What effect is digital disruption having on financial reporting? Put simply, are traditional financial reports still relevant? These are simple questions with complex answers.

Readers want clear reports that are easy to read, timely, and relevant

And this year’s 10th annual WriteMark Plain English Awards includes a category for the Best Plain English Annual Report. In this new category, the awards judges will be looking for ‘a report that all stakeholders, including those who are not financially literate, will find easy to read and be able to use to make informed decisions’. What makes a clear annual report? It clearly conveys the organisation’s messages, is  concise, and free of jargon. Technical terms are explained and figures presented in an easy-to-understand format. Graphs, tables, and photographs support key messages. Performance measures are explained, and indicators reported, in a way that allows readers to make useful comparisons with other companies or organisations. As Liz Koh points out:

…companies choosing to view annual reporting as a chore to be completed in a traditional way for compliance purposes may find themselves left behind as shareholders switch their attention to companies with more timely and relevant information flows.

We look forward to seeing the much clearer annual reports that we hope will emerge as companies join the wave of change.

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