Why Annual Reports have increased in Length
Annual Report is a detailed information setup required for the various classes of people relating to their sphere of activity. Stakeholders, creditors, financial analysts and customers require information relating to investment decisions. The core form of annual report is financial statements which are presented in the form of balance sheets, cash flows and outflows, detailed synopsis as well as management notes which also incorporate the auditor’s opinion (Friedlob and Welton, 2008). All these sources of information pooled together ascertain the total strength of the company. With the latest advent of technology these reports are available at the click of a button but a lot of pride and effort goes in preparing this. The present age of information explosion has contributed to the immense increase in length of the annual reports.
But there has been a change in this emerging pattern. According to the survey by the company Deloitte the reports have come down to the 2009 levels (Deloitte, 2011). To quote in the words of Sobel Sharp, Senior technical audit partner at Deloitte “Annual reports are 123% more than what they used to be in 1996”. The length of these reports has increased due to the complex reporting structures. Because of the towering nature these reports are decreasing in significance value and have lost its sheen. As these reports do a detailed scrutiny of the various fields in a company this information is required in minute details for everyone. Secondly certain mandatory requirements like company law and statutory procedures need to be followed which adds to its complexity (PWC in Wales, 2011). Thus, the exact causes for increasing the size in the length of the reports are the following:
• As standards and amendments are being modified on a regular basis increase in the number of disclosures contributes to the bulky reports (Financial Dublin, n. d.)
• Survey shows that companies feel that increase in goodwill balances (64 % of the company discloses) contributes in its image of credibility and further it compounds the problem of lengthy annual reports (Deloiite 2009).
• Constant mergers and acquisitions also adds to the problem (32 % of the companies were a part of this and there was an increase of 48% as compared to the last year)