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Annual reports: Fat, useless and full of jargon

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22nd Nov 2011
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Annual reports are too long and stuffed with management jargon, making them of little use to investors according to venture capitalist Jon Moulton.

The chairman of investment company Better Capital is often described as a “maverick” of the private equity industry and he lived up to his billing at an Ernst & Young panel discussion on financial reporting on Monday in London.

Moulton, a chartered accountant who has become one of Britain’s best known venture capitalists, said that the size of company accounts could be cut “spectacularly” while gaining “utility”.

“We get no opposition to the proposition that accounts are too long and too complicated but they continue to get so,” he complained.

“Large companies can be hideously complicated but auditors still need to get the communication across as to whether the company is a success or failure. Part of their job is about meaningful simplification.”

When researching one company on the internet, Moulton discovered that its chairman and chief executive had been fined hundreds of thousands of pounds for tax evasion. But the information was not disclosed in the company’s annual report, he noted.

Other panellists defended the value of annual reports, arguing they offered useful information for analysts and a repository for information about the business.

“Analysts will go through a report page by page and pretty much line by line when they are refreshing their model of a company,” said Ernst & Young financial reporting partner Leo van der Tas.

“There is a coherent report with everything you need in one place.”

Delegates at the event were ambivalent about the value of annual reports. In a conference vote 36% of delegates thought the annual report was the best way to inform “users”; 33% voted “no”; 31% were “not convinced.”

Stephen Cooper, a member of the International Accounting Standards Board, said there was a “lot of laziness” when preparing information for an annual report. “It’s easier to leave things in [of marginal importance] which can mask the important things,” he admitted.

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By nkwayne
23rd Nov 2011 11:28

Phew...

... I read the heading (fat useless and full of jargon) and thought for a moment someone had published a report on me!

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By The Black Knight
23rd Nov 2011 12:43

What does he want ?

"When researching one company on the internet, Moulton discovered that its chairman and chief executive had been fined hundreds of thousands of pounds for tax evasion. But the information was not disclosed in the company’s annual report, he noted."

That is surely information about the chief executive not the company.....how did he find that on the internet ? Unless it was a criminal prosecution not a civil investigation (as the article does not say prosecuted) it should have been confidential between the tax payer and the revenue......unless on a deliberate defaulters list (which I do not think there is yet ?)

There is plenty of information that might be relevant to an investor that is not included in company accounts.......are we to see, employees life histories included, sexual preferences and underwear colour disclosed.....might even convince me to go auditing again if it was that much fun.....

Even the weather report may have an important bearing !! Should that be included as well ?

Company reports have become ridiculously over weight because of the unrealistic expectations of the readers who are only looking for a yes or no answer and who will want to blame someone else for their lack of understanding !!

Accounts, finance and tax are complicated to simple humans.....this is just a fact of life.....no matter how simple this was made...most would still not be able to grasp the basics.

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By edhy
07th Dec 2011 05:41

Why not make two reports (published separately), first a summary report and second the fat full of jargon report. Most users will be happy with first report and the ones who want to dig deep will find second report useful.

Zubair Edhy

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