Prose and ASIC RG 247Last week, I re-posted an article about RG 247 – Effective disclosure in an operating and financial reviews – ASIC’s regulatory guideline that asks for better writing in annual reports. Annual report writing can be a tricky business, but it’s not too hard if you’re on top of the financial statements themselves.

This week’s article goes into a bit more detail about how to handle prose in your reports with the same care as the figures.

To start with, you don’t have to be a professional writer to get it right. So relax, take a deep breath, and begin.

1. Get into the mind of the prospective investor

If you were a prospective investor or fund manager, what would you want to know about before investing?

What happened throughout the year? What events were material to the performance of the company? Did you know about it at the time or foresee them?

What would your perspective be as an outsider trying to look in?

If you were a shareholder, what would you want to remember? No investor has perfect knowledge or memory; some people really like to be reminded.

2. Create a structure

The simplest structure you could make is simply a list of things you think are important to cover.

Use last year’s report as a guide, but look at it critically – after all, it came out just after RG 247 was released and might not be exactly how you would wish it to be in terms of compliance.

Another way to look at the structure is to think about the foundation elements of a business: finance, sales and marketing, human resources, operations, risk management and so on. If your company operates in a specialist field, consider whether you need a subheading about how it performed in that context.

3. Do a scan of investor communications

Have a glance through investor presentations and media releases made throughout the year – what did they get excited about? Should you include elements of them in your management commentary? Were there any events that happened subsequent to them that contradicted them?

4. Create a ‘word budget’

Open a new Word template or download one of ours.  This will be your starting point.

Paste a chunk of text into your template and use ‘word count’ to figure out how many words you have. Go through the template and allocate ‘word budgets’ – how many words you want to ‘spend’ on each section. That way, when you come to collate contributions from others, you’ll know whether to send something back to be cut down a bit, or send something back for more detail to be added it.

Above all, the report will start to take shape and perhaps not become overwhelming – or, in some cases, underwhelming!


Operating and Financial Report – the text/information part of an annual report.

OFR  – Operating and Financial Report

Narrative – writing that tells what happened – the story behind the figures in the financial reports

underlying reasons – this refers to things that happened in the past that caused something to happen

management commentary or management discussion and analysis – they mean, verbal analysis of the financial reports. They want you to leave out smart-sounded words and phrases that have no chance of providing real information to investors.

Some of the specific guides are explained below.

RG 247.13

“Despite the similarity in wording used in parts of s299A and the prospectus disclosure requirements, we do not expect an OFR to contain the same level of disclosure as a prospectus”

They do not require the same amount of disclosure as a prospectus. This doesn’t mean you can go back to using meaningless, fluffy words, it’s just that an operating entity can show performance by its financial statements, as opposed to a new, proposed entity.

RG 247.14

“The scope and depth of information that needs to be provided under s299A is considerably less than the information required in a prospectus or PDS”.

They do not require as much actual information in an annual report that they would expect to see in a prospectus.

This is because the annual report is provided to shareholders, who already have some opportunity of getting to know the company, about which there are already published results such as the stock price performance. Of course, the OFR is also accompanied by the financial reports themselves.

RG 247.15

OFRs in annual reports must contain all the information they are disclosing in the OFR itself. In other words, you can’t say “see Appendix D” or “See this website for more detail”. You have to make it all fit in the OFR.

More detailed information is available at ASIC’s website: Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247)

[box type=”note” size=”large” border=”full”]Further reading on the implications of ASIC’s Regulatory Guide 247 – Effective disclosure in an operating and financial review – can be found at the Australian Institute of Company Directors’ website (‘L’enfant Terrible’), Ernst & Young (‘Effective disclosure in an operating and financial review’), the Institute of Chartered Accountants Australia (‘ASIC releases guidance for operating and financial reviews’), Deloitte (‘Heads Up: ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review’), KPMG (‘Better Business Reporting – Operating and financial reviews’), and Grant Thornton (‘Technical Alert’).

How to structure your annual report writing like a pro: ASIC RG 247 by

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