Financial statements contain ‘no consideration’ for investors, says Crowe Horwath

Financial statements contain ‘no consideration’ for investors, says Crowe Horwath

The global push to simplify financial statements has gifted businesses the opportunity to undertake their own "decluttering" process regarding the content of their accounts, according to mid-tier firm Crowe Horwath.

Ralph Martin, Crowe Horwath audit technical director, noted that with widespread acknowledgement that financial statements have become too lengthy and complex, those who are tasked with preparing accountings should take advantage of recent accounting standards changes to improve accessibility to investors and other readers.

“Financial statements have grown in size every year, with a typical ASX-listed company often preparing more than 100 pages of information,” said Mr Martin.

“It’s not surprising that some companies revert to preparing two sets of financial reports: those required to comply with the Australian accounting standards, which are increasingly regarded as a compliance exercise, and those where the company produces additional, specifically tailored reports for its shareholders.”

According to Mr Martin, although it can be tempting to place the blame for cluttered reports on the accounting standards themselves, reports are currently over-reliant on generic templates and checklists, with no consideration for what investors would like to know, and how to best present said information.

“We see situations where companies with small market capitalisations are producing lengthy reports for shareholders. You have to ask what the benefit is,” Mr Martin added.

Mr Martin praised the International Accounting Standards Board initiative to revise AASB 101 Presentation of Financial Statements, which involves changing the structure of the financial statement reporting process to give more prominence to relevant areas.

“This includes a greater focus on relevance, removing unnecessary notes and wording, change to the order of the financial statements and to use plain English,” Mr Martin noted.

“The use of technical language and jargon is a common complaint by readers of financial statements, particularly when describing accounting policies.”

 

Financial statements contain ‘no consideration’ for investors, says Crowe Horwath
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