Information to be included in the Annual Report to Shareholders – 1991 Research Study updated 2008

In 1991, the Canadian Institute of Chartered Accountants (CICA) published a landmark research study called Information to be included in the Annual Report to Shareholders. This 317-page study was drafted by J. Paul-Emile Roy, CA under the direction of a seven-member Study Group chaired by Gerald Trites, FCA.

The Foreword to this study states: “The annual report has long been used by an enterprise as a primary vehicle of communication, not only with its investors or members, but also with other audiences who, for a variety of reasons, have a legitimate interest in the affairs and operations of the enterprise. Generally, the annual report contains the financial statements and associated notes. It also contains additional information which both elaborates upon the financial condition and operating results of the enterprise and provides non-financial information of interest and value to its audiences.”

It further notes: “To date, accounting and auditing standards have concentrated on the financial statements. They have paid relatively little attention to information outside the financial statements, which, to a large extent, has been regarded as the domain of the enterprise’s management. It is considered, in many circles, that a greater amount of discussion and analysis of the financial information needs to be provided than that currently contained in notes to the financial statements. This has resulted in a greater scrutiny being given to such matters, particularly by regulators such as the securities commissions.”

In addition, it states that “some concern has been expressed about the general quality of annual reports, which varies significantly among enterprises. It has been noted that the annual report has the potential of being "a shining affirmation of the company’s scope, strength, philosophy and aspirations"; on the other hand, "it can be dismal, ineffectual and boring - a wonderful opportunity lost".”

To address these matters, the CICA Accounting Standards Committee was prompted, in May 1989, to commission a research study to discuss the objectives of the annual report to shareholders and to recommend what information should be provided, beyond that which must be presented in the financial statements, to assist in achieving those objectives. Besides addressing information content, the study considers the form and presentation of information, reviews the concept of effective communication and considers annual reporting formats, summary reporting, graphics and other presentation matters.

It is noteworthy that this research study was updated and re-published by the CICA in 2008, under the title Corporate Reporting to Stakeholders (also refer to the August 25, 2008 blog posting). The updated study was prepared by J. Paul-Emile Roy, CA (author of the 1991 study) under the direction of a seven-member Study Group chaired by Gerald Trites, FCA (chair of the 1991 Study Group). It aims to promote effective communication between a company and its stakeholders by providing useful guidance to preparers of corporate reports. It is based on an in-depth review of the annual reports and websites of 125 companies that participated in the ongoing CICA Corporate Reporting Awards program. In addition, this study examines practices and significant trends in corporate reporting by analyzing:

·       more than 50 different types of information disclosed in 2004-2005 annual reports;

·       major changes in the 2004, 2005 and 2006 annual reports of award-winning companies;

·       information content, presentation and navigation on company websites in 2007.