Today in annual reports there is a wide communication gap between disclosure and compliance. In many respects it is a troubling document because it mixes pecuniary results with public relations schooling. Even with the introduction of new more sophisticated ensamples (IFRS, GAAP) the annual report continues to look the same as it did before reform; if anything is different, footnotes became more extensive and highly skilful than ever before. Therefore it made them more complex and rattling difficult to interpret for individual investors. In the example of Ladbrokes PLC the footnotes champion 70% of the (130 page) annual report. The problem is that there are two types of people who use annual reports. The first is the individual investor for whom it is a struggle to make sense out of the large mickle of technical information. The second is the analysts, accountants and regulators, who understand complexities of finance. This means that transparency in a real sense does not exist in the annual report.
The footnotes are aimed to satisfy the legal form of transparency, not to provide real-world disclosures that the investor would want and need, such as helping to square up straightforward answers to simple but all-important questions: Is the company a viable long-term investment, and is its capital strength improving or declining? (Glen Arnold 2005)
Recommendations for improvement
Transparency should be defined on an expand level. This definition should include the need for uniformity in reportage standards and formats; it would ensure that the investors would find the same sections of the annual report in the same collection.
A similar change is needed in footnotes. The original purpose of footnotes was to provide support for the summarised numerical information in financial statements. The fact that there is no standard for the sequence or titling of footnotes is troubling situation for investors. Creating a specialised sequence and...If you want to get a full essay, order it on our website: Ordercustompaper.com
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