Narrative Reporting
Writing the narrative: the triumphs and tribulations
By Afra Sajjad Introduction In recent years, particularly since the advent of the global financial crisis, the debate has grown over whether annual reports have relevance to investors and other users, and enable them to make proper decisions on companies’ prospects. To bridge the perceived information gap, and to satisfy the information requirements of the standard setters, narrative reporting has come to the fore. In its various guises – Business Review, Management Commentary, Management Discussion and Analysis, Chairman’s Statement, Corporate Governance Statement, Environmental Statement, Remuneration Statement, and Health and Safety Statement – narrative reporting is now a significant segment of the annual report in many parts of the world. It has supplemented and complemented financial statements by including prospective and retrospective information on a range of key issues: including the business model, strategy and structure, customers, human resources, innovation, brands, intellectual assets, supply chain, economic performance, operating performance, environmental, social and ethical performance, risk and uncertainties, and corporate governance. This disclosure been made in various formats – text and figures, illustrations and graphs, key performance indicators and case studies – and has become increasingly voluminous. This extension of narrative disclosures in annual reports has in turn raised questions on whether businesses’ substantial investment in data collection and the production of narrative reports is justified. Does narrative reporting succeed in enhancing the value of annual reports to its primary users of annual reports? Narrative reporting – the current predicament The International Accounting Standards Board’s (IASB) IFRS practice statement Management Commentary explains narrative reporting as an opportunity for the management to explain its
By Afra Sajjad Introduction In recent years, particularly since the advent of the global financial crisis, the debate has grown over whether annual reports have relevance to investors and other users, and enable them to make proper decisions on companies’ prospects. To bridge the perceived information gap, and to satisfy the information requirements of the standard setters, narrative reporting has come to the fore. In its various guises – Business Review, Management Commentary, Management Discussion and Analysis, Chairman’s Statement, Corporate Governance Statement, Environmental Statement, Remuneration Statement, and Health and Safety Statement – narrative reporting is now a significant segment of the annual report in many parts of the world. It has supplemented and complemented financial statements by including prospective and retrospective information on a range of key issues: including the business model, strategy and structure, customers, human resources, innovation, brands, intellectual assets, supply chain, economic performance, operating performance, environmental, social and ethical performance, risk and uncertainties, and corporate governance. This disclosure been made in various formats – text and figures, illustrations and graphs, key performance indicators and case studies – and has become increasingly voluminous. This extension of narrative disclosures in annual reports has in turn raised questions on whether businesses’ substantial investment in data collection and the production of narrative reports is justified. Does narrative reporting succeed in enhancing the value of annual reports to its primary users of annual reports? Narrative reporting – the current predicament The International Accounting Standards Board’s (IASB) IFRS practice statement Management Commentary explains narrative reporting as an opportunity for the management to explain its