Annual report writing for accountants big

Is your annual report compliant?

Last year, I started writing about how ASIC wanted companies to start including more meaningful information in their management commentary – that’s the writing part of annual reports.

asic quote 2 29.06.2013

Last year (2013), ASIC issued a regulatory guideline saying it wanted management commentary to relate more directly to the financials in the report, and to the material events that had happened throughout the year.

ASIC’s ultimate aim is to have Australian company information at a standard whereby ma

Sounds logical, right? When you’re looking for real information, apparently the place not to look is a company’s annual report (although you may find some weird scuttlebutt in some of those reports).nagement commentary in annual reports can be used as part of the mix when people and professionals evaluate the company’s shares with a view to purchasing.

Accountants and financial controllers are used to looking at concrete figures and graphs and, after they’ve included and checked them, only run a curious eye over the directors’ reports and hope for the best.

However, there are ways you can strengthen the quality of the management commentary without getting out of your depth or disclosing something in a ‘wrong’ way. Even in writing (as opposed to fiures), there are ways of being accurate – take it from the only ‘word person’ in a multi-generational line of accountants and bankers – me!

How to comply with ASIC RG 247

This is part two is a series designed to help ‘numbers people’ increase the quality of their management commentary, and improve the narrative in your operating and financial review.

It will also help you to write faster and more accurately.

Principles of good writing in management commentary

In ASIC’s recently regulatory guideline (RG 247), they stipulated they want  good writing and editing in annual reports.

Sometimes also referred to as ‘management commentary’ or ‘management discussion and analysis’, the guideline requires the Operating and Financial review section of a company’s annual report to contain narrative (text or writing) that

  • gives a good overall reflection of what the numbers in the financial statements say
  • fairly represents the material events that happened throughout the year
  • doesn’t leave out issues that the company thought were important to investors throughout the year – for example, if you disclosed something significant in August, why did it disappear from the story by the time of the publication of the annual report?
  • doesn’t drown the reader in irrelevant detail – the words serve to guide the reader in seeing the important stuff instead of being overwhelmed by information

In simpler terms, when ASIC says they want you to write management commentary ‘meaningfully’, they don’t mean they want you to become Stephen King or J K Rowling overnight. What they mean is

  • don’t waffle – get to the point
  • write more clearly
  • don’t leave out important things
  • leave out smaller internal operational issues

so your writing actually communicates how everything’s going with your investor audience instead of using it to create fear and confusion”.

The longer title of the guideline is Regulatory Guide 247 Effective disclosure in an operating and financial review.

The Regulatory Guide is here:

Regulatory Guide 247 Effective disclosure in an operating and financial review

 

[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’).
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Annual report writing for accountants 2: how to comply with ASIC RG 247 by

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