Making your financial statements an effective communication tool

Your annual financial statements are a critical communication to your investors and other stakeholders. But how effective are they in meeting your stakeholders’ needs?

The average length of financial statements prepared under IFRS has been growing for many years, as more disclosure requirements are added. In the near future major new IFRSs on revenue, financial instruments and leasing will add more.

All this increases the burden on you – the preparers. Disclosures are added for good reasons – responding to more complex business models and transactions and investors’ needs to understand them. Unfortunately, many investors complain that the result is cluttered financial statements in which the truly important information is hard to find.

The problem is not just down to the standards. Companies have struggled to apply the materiality concept to their disclosures. A fear of regulatory challenge has led companies – and their auditors – to take a ‘safety-first approach’. A reluctance to deviate from well-established practices has led to duplication, irrelevance and ‘boilerplate’. Against this backdrop, many companies are taking a fresh look at their financial statements and their process for preparing them. Their goal is to refocus on the communication objective, without losing sight of the need to comply with the technical requirements.

This publication explains and illustrates how companies – with support from regulators and from the standard-setter – are doing this. We explore the four key tools you can use to better tell your story.