BAO2203 Corporate Accounting and Emerging Management

Introduction

There are numerous other ways like press releases and individual meetings which also share the company’s information to the people who require it. But it should also be mentioned that these activities of the company vary from person to person. This point stands stable because a whole lot of information about company’s activities is disclosed in the annual report. Though the annual report is tried to be compared to other ways of getting the company’s information, but this one’s a unique and cannot be matched from any other mode (Vinten, 2004).

Annual report – the place for every information

The capability of the financial markets of the company is a way to highlight the value of the company and this point mainly depends on the amount of disclosure of facts and figures done in the annual report of the company. This is because the availability of information about the company will help to compare the company’s standards with the values of the financial market and in a way, the participants of the market can get a chunk of information about the company at a low cost (Ghazali, 2010). There are companies who depends on different modes of communication to communicate the activities and to disclose the facts and figures to the users, but above all this, the method of the annual report is regarded the most important and the best way to all the one’s present in the market. This is mostly because of the risk-free nature of the annual reports. This is because they not only show the present conditions of the company but also offers the users a vision of the future cash flows depending on the investments done in the company. However, it should also be taken into consideration that offering each and every single fact and figure can increase the expenses of the companies, and so it is seen in many cases that the companies are letting lose or being a bit lazy in the process of drafting of the annual report. It is also not necessary that a single piece of annual report can satisfy all the users, and many of the users can regard the issued annual report as of no use or as outdated. For an example, in Malaysia, it is thought that the best way to get information about the company’s present conditions is offered by visiting the company once in a year, as considered by the analysts. This method is regarded as the most significant way.

Annual report – benefits the users

On the part of the users, they are eager to get more information about the company and in the case of the management who draft the annual report; each and every disclosure increases the expenses of the company. Through studies, it has been known that the battle between the users and the preparers due to the information procedure is statistically relevant at five percent (Yeo, 2010). This shows that the preparers are not able to fully satisfy the desires and requirements of the users. Numerous ways like interim reports, prospectus, financial press releases, etc are some of the numerous ways in which the company can disclose the important facts and figures, but most of the users consider the annual report as the best way to know about the company’s activities about financial conditions (Wang & Wu, 2011). Limitations of the other ways are like, prospectus is made available to be seen by the ones who are desiring to buy the securities of the company, interim report is prepared and directly send to the shareholders of the company, if any other company wants to make a personal deal with the respected company then the third party can contact the company as they evaluated the information got from press release and other correspondence and found the company to be fruitful (Samaha & Dahaway, 2010). A corporate report can be easily be formed on the basis of any of the methods of disclosing the information, but through all these methods provide data but the annual report is then also considered as the most preferred way. This is because every person of the society can get a hand on the annual report and can get the desired data, while the other methods are direct a special group of people, unlike the case of the annual reports (Ghazali, 2010). It can be seen that the annual report requires some modification at large but then also its advantages cannot be neglected because these advantages play a very important role in company-society and company shareholders relations. Due to the easy availability of the annual report by everyone, it is much more famous. Besides, it can also be seen that the annual report is prepared by the auditors which ensureds safety and builds the confidence of the users at large as they trust the annual report easily and totally. In addition to financial statements other relevant information like statistical data, business outcomes, financial statements and also the plan's policies is provided in the annual report of a company, which is absent in any other method of communication (Lev et. al, 2008). Just one think to be watched out in the case of annual reports is that to make it more informative which will easily prevent the users from switching to any other modes.

Inefficiency spotted

Attention should be paid that mass criticism is due to the inefficiency of the annual reports of the company. Decision-making processes require the annual reports at large. For example, in UAE the users didn’t require annual reports for making invested because of it outdated nature. These investors consider financial conditions and background data was lacking due to which they cannot relate it to their investments (Ghazali, 2010). But in the other case, the people of UAE considered the report to be perfect. But 56% of the survey done in the USE proves that the annual reports are outdated. Therefore, work is required for the reports to make them perfect for everyone. The annual report helps the users to compare the company’s performance over the years. Although other methods can provide data but they cannot compare the performance. There is a lot of pressure from the public to update the standard of the reports. This is the reason why private meetings with the company are becoming more popular (Alzarouni et. al, 2011). It is also seen through studies that many companies fail to show their long-term performance and future cash flows in the annual reports.  Thus, it should be seen that the annual reports are updated on time.

Conclusion 

So, it is all transparent and understood that there are many reasons of the reports becoming outdated. The utility of the report is damaged by the reluctance of the company to hide information to reduce expenses. But the matter of outdated report is yet to be settled as different individuals have different views. Thus the standard of the annual report is not a match for any of the other mode and the increase in the information of the reports will limit the use of any other mode of communication.

References

Alzarouni, A, Aljifri, K,  Ng, C & Tahir, M, I 2011, ‘The usefulness of corporate financial reports: Evidence from the United Arab Emirates’,  Accounting & Taxation, vol. 3 No. 2, pp. 17-37.

Bellamy’s Australia Ltd. 2016, Bellamy’s Australia Ltd Annual report and accounts 2016, viewed 22 May 2017 https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BAL_2016.pdf

Ghazali, N.A.M 2010, ‘The importance and usefulness of corporate annual reports in Malaysia’, Gadjah Mada International Journal of Business, vol. 12, no. 1, pp. 31-54.

Lev, B, Ryan, S, Wu, M  2008. ‘Rewriting earnings history’, The Review of Accounting Studies vol. 13, pp. 419–451.

Vinten, G 2004, ‘Voluntary annual report disclosures: What users want’, Managerial

Auditing Journal, vol. 19, pp. 152-153.

Samaha, K. & Dahaway, K 2010, ‘Factory influencing corporate disclosure transparency, in the active share trading firms: An Explanatory study’, Research in Emerging Economies, vol.  10, pp. 87-118.

Wang, X & Wu. M 2011, ‘The quality of financial reporting in China: An examination from an accounting restatement perspective’, China Journal of Accounting Research, vol. 4. pp. 167-196.

Yeo, P 2010, ‘Narrative reporting: the UK experience’, International Journal of Law and Management, vol. 52, pp. 211-231.