Communication with shareholders and stakeholders through financial report Essay Example

Communication with shareholders and stakeholders through financial report Essay Example Communication with shareholders and stakeholders through financial report Essay Communication with shareholders and stakeholders through financial report Essay The company chiefly communicates with its stockholders and other stakeholders through its fiscal study. Therefore the chief aim of a fiscal study is to offer information which is utile to current and possible investors for determination devising ( FASB ) . Fiscal statements entirely can non give a balanced and apprehensible position of the company s place and chances. Therefore a assortment of narrative studies have been included in the Group one-year study, which provides extra information that are non- fiscal on the company s stance, public presentation and chances ( ORegan, 2001 ) . This narrative subdivision is non audited by hearers as the fiscal subdivision, but still many users rely on this to measure the place of the company. Therefore, the company would frequently utilize artworks and other distraction methods to pull strings the fiscal figures in order to do the study look more attractive to the current and possible investors ( Penrose J.M. , 2008 ) . Use of coloring material and artworks The in writing interior decorator of the one-year study can pull strings the perceptual experience of the informations in a graph ( Penrose.J. 2008 ) . As mentioned in the debut, houses tend to utilize distraction methods so as to do the narrative study look more attractive. Pennon Group is no different than the others. There seem to be several efforts made in order to deflect the reader. A really obvious case is the use of cardinal public presentation indexs at the top of the page. On most pages KPI s are given as high spots, frequently out of context in really attractive artworks. This would decidedly deflect the several reader from reading the long paragraphs. Another method used by the Group is the use of graphs largely on the left page of the study. This distracts readers because it is frequently the first thing they would see. In other cases when two graphs are provided for comparing frequently the axis of both graphs are non the same, which can misdirect readers. Furthermore gridlines are non available in these graphs, doing readers to presume the figures. The study besides seems to hold used a batch of colorss and attractive artworks in most pages. Often about a one-fourth of the pages are full of artworks. Because the artworks look attractive, the readers might presume that the company had delivered a strong public presentation financially during the twelvemonth. The Canadian Institute of Charted Accountants ( 2008 ) points that utilizing graphs would assist concentrate involvement, attract, aid understand and salvage clip in analyzing informations. The narrative subdivision of Pennon Group consists of many types of artworks. Column charts and pie charts appear be the most common out of the remainder. Besides a broad scope of images, designs and colorss are used to foreground other points. The graphs provided are rather easy to construe. Often Different colorss are used to separate between clip periods. Furthermore the usage of blue and green to separate between the two subordinates proves to be rather effectual. The artworks provided are besides rather dependable, as the information it represents agrees with the underlying information. However most of these artworks are irrelevant to the informations it represents. For case alternatively of utilizing a column chart to stand for turnover, it would hold been more appropriate to utilize a line chart, as shown below. The current and possible investors will hold really small problem in measuring the public presentation, as the artworks are comparable between two pieces of information. Previous twelvemonth s figures are given along with the current twelvemonth s figures, doing comparing effortless. The use of artworks bypasses the linguistic communication barrier, and hence enabling non-English talking investors to grok better. Because frequently the inclusion of proficient footings would confound most readers. In similar cases these graphs make certain to convey the intended message. Use of Language Pennon Group has worded sentences carefully when covering with bad intelligence that would upset investors. One such case is when the president references that one of the subordinates of the Group, Viridor Limited had delivered a strong fiscal public presentation in a really ambitious environment . By utilizing the words ambitious environment Pennon Group tries to do Viridor Limited expression better in the eyes of the investors. This would besides connote that Viridor Limited had performed moderately good during the twelvemonth. There are besides cases where the words unsure planetary economic background had been used in the narrative study to depict low or worsening public presentations. Besides on one juncture the study references that operating net income has increased despite the lessening in demand . By adverting that the operating net income has increased , the fact that the demand has really decreased will non be highlighted. What they say . The several users of the studies may non be interested in all those information that have been presented in narrative studies and would instead stress merely on relevant information they may necessitate to help their determination devising. Therefore the Pennon Group s narrative study shows two cardinal features as illustrated in the FASB exposure bill of exchange, relevance and faithful representation. The information presented in Pennon Group s one-year study 2009 seems relevant to bing and possible investors. Adequate utile inside informations about the public presentation and the fiscal place of the Group during the current twelvemonth have been given. Besides a drumhead which includes many cardinal public presentation indexs ( KPI s ) is provided. These were besides presented rather accurately, and are the same as in the fiscal statements, and were non misdirecting. This besides saves the problem of tossing through the whole study looking for information. However, the above two cardinal features would non do in the reading of informations. Different users may hold different involvements in these studies. Therefore it is indispensable to heighten these cardinal qualitative features to be of more usage to the users. The FASB exposure bill of exchange of May 2008 identifies four more features that could heighten the utility of the narrative studies, viz. , Comparability, Verifiability, Timeliness and Understandability. 2.1.2 Comparison FASB exposure bill of exchange of May 2008 points that comparison enables users to place similarities and differences and measure the Group moderately accurately. The information given in the Pennon Group s narrative study was reasonably easy to compare with figures of the past. Any addition or lessening during the twelvemonth was explained with comparing to old old ages. Besides due to the fact that Pennon Group prepares their histories harmonizing to relevant accounting criterions it makes it reasonably directly frontward to compare with other similar companies in the industry and acquire an overall thought about how the Group is executing. 2.1.3 Verifiability John. M. Penrose exemplifies that narrative studies are non capable to be audited. Although it is non audited the information provided by Pennon Group appears to be presented in a dependable mode, and the information agrees with the underlying informations. 2.1.4 Seasonableness Pennon Group has merely presented information in the narrative study that is utile for the users and that will most likely act upon their determination. Irrelevant information about old old ages was non highlighted in the narrative study. Although it would hold been of aid to the users of the study if a line chart was included which would demo the gradual addition in gross during the past old ages. 2.1.5 Comprehensibility The information provided in the narrative study was rather straightforward. The information is given in simple English with really small proficient footings. Besides the fact that information is categorized under relevant subheadings makes it even easier to construe. The usage of colors was besides used to separate between the two chief subordinates. The frequent usage of paragraphs to foreground different points was really utile to users when looking for specific inside informations. Besides the inclusion of numerical figures to back up the information given increases the degree of comprehensibility. What they do nt state . The narrative subdivision of Pennon Group provides a huge sum of information to assorted users. However at that place appears to be certain critical points which were non highlighted within the study. The narrative study has emphasized on the net income before revenue enhancement, but has failed to foreground the fact that net income after revenue enhancement has been on a diminution. This is shown in the fiscal study, but non in the narrative study. Another critical piece of information withheld from the readers, is the fact that the addition in Earnings per portion by 6 % every twelvemonth is in fact a company policy merely till 2010. With the reduction net income after revenue enhancement it is difficult to vouch such an addition after 2010. Potential and current investors reading the study might acquire a incorrect feeling and this may overcast their opinion. Drumhead In brief, the intent of a narrative study is to supply extra information to investors to help them in their determination devising. The narrative subdivision of Pennon Group was able to accomplish this by supplying information which was utile from a stockholders point of position. The information provided shows features of lucidity, comprehensibility and effectivity which can be interpreted by a current or possible investor even with a minimal accounting cognition. Furthermore, the information seldom varies from the truth giving a just and balanced position on the company s stance. To sum up, it can be accurately concluded that the information provided in the narrative statement makes certain it provides the user of the study the intended message, with minimal divergences.