Issue of increase in the length of annual report - Essay Example

All of this means that a prospective reader of the report will have to analyze a large number of pages to reach to appropriate conclusion. The analysis of this report is to analyze the issues arising out of increase in the length of annual reports. The first section of the essay covers the major reasons of increase in length. The second section analyzes the impact of the larger size in terms of effectiveness of communication to appropriate stakeholders and the problems therein. We will then conclude with the possible solutions to the problems identified.

Reasons for increase in the length of annual report One of the primary reasons for the increase in the length of the annual report is the imposition with regards to the representation of information in annual reports. The various statutory laws and the mandatory disclosure that the organizations have to make in their annual reports: Director’s reports including business review: This section which has been made mandatory by the Companies Act (CA 2006) shall cover the performance of the company including analysis of the significant developments happening in the company and the industry, analysis of key financial indicators, the trends in the industry, employee information, the macro and industry level environment factors along with social and community issues and initiatives.

The operating and Financial Review: These guidelines published by the ASB’s reporting statement have made it voluntary for organizations to publish the operating and financial review. For example discussion on investment in intangible assets such as brands and liquidity is a very important requirement for organizations. The 2008 Annual report of Reed Elsevier and Great Portland Estate’s annual report such discussions in length. Corporate Governance disclosure: The Listing Rules, The Disclosure and Transparency Rules (DTR), The Combined Code and supporting guidance make it mandatory for a firm listed in UK to make statement of its application and compliance to the main principles of the Code.

There are additional requirements imposed on by the Turnbull Guidance (on internal controls), the ‘FRC Guidance’ on audit committees. The organization is also required to ascertain its status as a going concern in the annual report through appropriate explanations. Some of the other additional items that are required as per various statutory laws in the annual reports include: Responsibility statement from the appropriate selected member Director’s liabilities for disclosures Information on gap between gender pay Greenhouse gas emissions Audit The Companies Act 2006 (CA 2006) has also resulted in additional business review requirements in the annual reports of the listed organizations.

Material contracts: Lord Sainsbury in 2006 also suggested adding certain important material contracts of the firm with suppliers as well as buyers that have a significant impact on the business. Certain annual reports contain certain information that is not relevant to any of the stakeholders. In addition, organizations also indulge in reporting information that does not change from year to year in annual reports. Immaterial disclosures that make it difficult for the reader to identify and analyze relevant information also increase the length of annual report.

Such type of information has been called ‘clutter’ by the ASB. Majority of the clutter in the annual