Transforming the listed companies’ annual report into a concise financial report

Abstract

PURPOSE: Considering the IASB’s current project on better communication, this dissertation assessed whether a CFR will suffice the retail investors. This study also analysed what content a summarised report should consist of and whether it will eventually improve communication in financial reporting between companies and their retail investors.

DESIGN: This dissertation takes a qualitative approach, and the objectives were reached through conducting several interviews with senior management personnel of several MLEs, as well as several regulatory officials. Moreover, a focus group with a few retail investors was also created.

FINDINGS: It is established that, the value the investors are getting from the annual report is minimal, despite it being one of the most important communication mechanisms. Currently, there is more emphasis on the quantity rather than the quality of the information, with a lot of details hindering the retail investors from reading the report. Notwithstanding the fact that many of the retail investors are passive, they still expect an adequate level of information which is sufficient.

Findings indicate that all the financial statements, including comparatives, but excluding the notes, shall be included in a CFR. Furthermore, as it is established that retail investors, may at times, prefer narratives to financial information, the full statement of the chairman, director’s report, review of operations by the CEO and the audit report are also to be included in a summarised report, referred to as an SAR.

CONCLUSIONS: It is concluded that where the retail investor is concerned, understandability of financial information is still a problem. With the provision of a summarised report, investors may feel more comfortable when investing, as they will be able to better understand the information. While, initially, there may be some resistance to change, it is concluded that as the majority of the retail investors are not so involved in the market, they will be satisfied with a shorter report.

VALUE: This dissertation continues to evolve the subject of concise financial reporting in the local scenario. Hence, it can serve as a foundational research and assist local authorities, should the annual report be transformed into a concise financial report, specifically prepared for the retail investor.