Discuss the Implications of the Increaing Length of Annual Reports - Essay Example

In this regard, many independent and regulatory authorities have tried to protect the investors’ and shareholders’ interest from managements’ biases by taking major steps like corporate governance and accounting policies. Publication of annual reports is one the basic responsibilities. With tightening policies from regulatory authorities, the managements are required to disclose number of information other than financial statement. This paper will attempt to present the purposes and increasing length of annual report and its implications (Stittle, 2003, p.143). Purposes and Importance of Annual Report Annual report is primarily associated the disclosure of the financial report of a corporate which is important for the users like prospective investor, existing shareholders and creditor for making economical decisions.

Financial information is highly required as it shows the financial health of the organisation like financial risk, stability, volatility, assets, liabilities etc (Valencia College, n.d.). However, merely disclosing the financial information does not serve the purposes for protecting shareholders’ interest by offering sufficient level of transparency. . The annual report also discloses other necessary information which is highly required for ensuring the biased free information. For example, the company also discloses accounting policies, footnotes which act as empirical studies for the stakeholders.

Form the companies’ perspective, annual reports are also used for market signalling by disclosing a number of voluntary news and recent developments. Moreover, the annual reports are prepared in the simplest way so that a person with basic knowledge of economics is able to understand the internal information and activities. The companies are obligated to ensure that each of its stakeholders is able to access the annual reports and hence, publicly listed companies are responsible for publishing its annual reports through corporate websites, economic journals and news papers, and subscriptions (Vause, 2009, p.9). Increasing Length of Annual Report and its Implications To make the annual reports more relevant with enhanced disclosure has become a challenge for both the regulators and firms.

On one hand, regulatory authorities require that the companies’ annual reports must be understood by ordinary shareholders and investors; on the other hand, they are required to include complete and transparent disclosures. The recent financial crisis of 2007-2010 has marked the importance of financial disclosures. The international and independent organisations like FRC, OECD, IASB and FASB require wide ranges of information as mandatory disclosure. The IFRS and US GAAP are two major financial reporting frameworks that recommend upon the accounting standards and disclosures in the annual report.

Their requirements of disclosure have been constantly increased for better transparency and monitoring the activity of the