Do Annual Financial Reports have to be so lengthy and cluttered Essay

Do Annual Financial Reports have to be so lengthy and cluttered - Essay Example According to a recent report by Deloitte, many of the larger firms have reports that are more than 309 pages in length. Companies disclose their business risks, the key performance indicators, and these disclosures are in response to the EU Transparency Obligations Directive. A few areas that lead to clutter are immaterial disclosures, needless explanations that prevent the reader from understanding important information. Other areas for clutter are long explanations given as declarations and footnotes that do not change every year. Other examples are detailed notes online items, share-based payments and so on. These are included more as behavioural influence from the previous years. Accountants fear comments from regulatory agencies that the reports do not disclose all the required information and hence they include a number of declarations and narrations about even minor items. Other areas that lead to excess clutter is information on corporate social responsibility, deferred tax, directors’ report and statutory information, financial instruments, intangibles, principal subsidies, movement tables, post-retirement benefits, principal risks and remuneration report.... Other examples are detailed notes on line items, share based payments and so on. These are included more as behavioural influence from the previous years (Campbell and Slack, 2008). Accountants fear comments from regulatory agencies that the reports do not disclose all the required information and hence they include a number of declarations and narrations about even minor items. Other areas that lead to excess clutter is information on corporate social responsibility, deferred tax, directors’ report and statutory information, financial instruments, intangibles, principal subsidies, movement tables, post retirement benefits, principal risks and remuneration report (Holmes, et al, 2008). One of the most abused areas that have excessive clutter is the Corporate Social Responsibility section. Many firms, such as BP and Wall-Mart, actually devote more areas on providing information and high gloss pictures on the CSR activities than they do for the actual financial reporting (Kindle berger and Aliber, 2005). While the information given in this section is entertaining and helps to understand that the company does social work also, the large volumes of information, data about various committees, sub activities, and so on do not help an investor to allot resources or to understand the health of the firm (Humpherys, et al, 2011). Another area that sees the most clutter is the section on governance. The UK Corporate Governance Code has 52 provisions but firms can show compliance to only 18. In the annual report, the firm can demonstrate how it has complied with these 18 codes. For the remaining codes, it can give the number and state briefly the reason for non-compliance. However, many