1. DIRECTIONS
MONTHLY
SUPPLEMENT
APRIL 07
TRENDS AND ISSUES IN THE WORLD
OF CORPORATE REPORTING
BIG, SHORT, PRINT, ONLINE – WHAT SORT OF ANIMAL
IS THE ANNUAL REPORT EVOLVING INTO?

2. Directions Monthly April 2007 Issue 11
Welcome to the April edition of Directions Monthly. The annual report has
suffered from being an uneasy alliance of several different objectives. But no
longer will this report exist as we know it – new legislation means companies
will have a range of reporting options. So what form will the annual report
take? This month we’ve invited Robert Bruce, a regular columnist for the
Financial Times, to shed light on the evolution of the species.
Nigel Salter Lucie Harrild
The annual report has been on a long journey – taking many shapes
and forms along the way. How will companies take advantage of the
range of reporting options which they now find available to them,
and how will the traditional beast develop?
Sometimes it is the sheer lunacy of a policy reporting. They are trying to put across their
which brings a real issue into focus. Douglas strategy, their performance, their financial
Flint is Group Finance Director with HSBC stability, in ways which they hope ordinary
Holdings. He runs the finances of one of the people in the business arena will find easier.
largest banks in the world. At a conference Companies hope to both increase the speed
last November he talked about his annual with which they can get the message across
report. During the implementation of and also the depth of understanding, which
international financial reporting standards, tends to be easier to get across in words
(IFRS), he had found that the number of rather than figures.
new systems codes they had to introduce
increased by 67% since the introduction
of IFRS in 2004. The annual report and
accounts, which back in 1997 had run to
Robert Bruce 100 pages, now exceeded 400 pages and
Columnist for the Financial was too heavy to be delivered by
Times and leading commentator conventional post. The Post Office had
on accounting and financial deemed its weight a health and safety
reporting issues. issue for postmen.
It is an anecdote like that which brings
you up short. The whole business of
having to send out a full statutory
annual report and accounts to
shareholders was leading to procedures
which made no sense. And at the
same time the introduction of IFRS
had lead to a very different look to
the way that financial information
was explained. Inevitably during the
first few years of implementation
these figures would be largely
incomprehensible. It is only going
to be in the long term that familiarity
and understanding will grow. In the
meantime, in the short term, companies
need to try other ways of putting their
message across to shareholders and
other stakeholders.
The consequence of this has meant that
companies are looking increasingly at
employing more elements of narrative

3. Directions Monthly April 2007 Issue 11
❝
This legislation has come like an earthquake in the world of
producing the annual report and accounts. No one is entirely
sure what the landscape will look like once the dust has settled.
But there are several distinct and likely consequences.
❝
So people are harking back to the plans they Initially the DTI reckoned that the resulting The third is that the use of short summarised
had when the operating and financial review, savings in postage and printing costs would reports can be tailored to different groups.
(OFR), was due to become a mandatory part be around £50 million across the corporate Environmental activists need no longer
of their annual report and accounts. This world. But, having now made a few more trawl through the rest of the information
document was to include a whole range of consultations, they think that this is a wild before identifying the precise information
narrative reporting from future strategy to under-estimate. Certainly HSBC will no longer they were looking for, for example. The same
key performance indicators. The mandatory have to challenge the health and safety of the would be true of many discrete user groups.
element of the OFR was precipitately tugged nation’s postmen.
out from under corporate planners’ feet last But ultimately the new legislation has
year. But the European rules on producing a Under the legislation, if companies receive one overwhelming advantage. It gives
Business Review can conveniently be fitted shareholder approval, shareholders would companies choice. And companies will
into its place. only receive a printed version if they make be judged by the choices they make. The
what is described as ‘a purposeful request’. tyranny of the old annual report and
But the old problems surrounding the annual And even in those circumstances companies accounts will go. Companies now need
report and accounts remained. The document may decide that what they send out is a to make sense, and take advantage of,
suffers from being an uneasy alliance of several simplified and summarised version. the wide range of options which they
different objectives. It is a calling card, a now find available to them.
marketing tool which shows off the company’s This legislation has come like an earthquake
virtues and aims. It is the repository of the in the world of producing the annual report
financial figures, generally indigestible and and accounts. No one is entirely sure what
often a solid block of grey type across many the landscape will look like once the dust
pages. It is the place where the Chairman and has settled. But there are several distinct
the directors strut their stuff. All these elements and likely consequences.
pull apart from each other. And it has become
increasingly difficult to defend the purpose of The first is that companies are likely to put
the annual report and accounts in its position much more resource into their online offerings.
of being an odd alliance of the statutory and Traditionally corporate websites have been an
non-statutory, the financial and the non- uneasy combination of consumer information
financial, the marketing document and the and investor relations. The new legislation is
listing requirement. going to make the investor, shareholder and
other stakeholder information which appears
For once a Government initiative looks into a much more important part of the corporate
to have solved the conundrum. offering. Transferring much of the narrative
reporting into an online resource, which some
This is highly unusual and most people would companies may do, opens up all manner of
rack their brains to recall another occasion possibilities. The idea of animated graphics
when the Department of Trade and Industry to show how key performance indicators are
did something which the corporate sector shaping the achievement of corporate strategy
found useful. But what the DTI has done, as a is only one idea which could now become a reality.
result of a section of the new Companies Act
2006 which came into force in late January, is The second is that companies will change
allow the corporate sector a new route forward. the emphasis of their printed offerings.
The combined use of an annual report and
Essentially the DTI has enabled companies, accounts as both a shareholder and marketing
having gained shareholder approval at an document no longer needs to happen.
annual general meeting, to scrap the printed The need to have everything in the same
version of the annual report and accounts package vanishes. Different corporate
which had to be sent to all shareholders and documents can be produced which can be
effectively make an online version the default aimed more directly at the requirements of
position. This has far-reaching consequences. different users.

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Contact:
Nigel Salter Lucie Harrild
nsalter@salterbaxter.com lharrild@salterbaxter.com
Tel: +44 (0)20 7229 5720 Tel: +44 (0)20 7229 5720
Directions Monthly supplements our main Directions report. This report is published each
year and is now regarded as the UK’s most comprehensible analysis of the trends and
issues in CR communications. If you want a copy of the full Directions Annual Survey and
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