British regulator says company annual reports need a makeover

LONDON (Reuters) - Company annual reports are far too long and need a makeover to better serve investors in the digital age, Britain’s Financial Reporting Council said on Tuesday.

Despite attempts to streamline company reports by ditching “boilerplate” or generic disclosures, some have swollen to several hundred pages, making them harder for investors to navigate and digest.

“We are getting to the stage where the concept of the annual report is at breaking point,” said Paul George, the Financial Reporting Council’s (FRC) executive director of corporate governance and reporting.

The FRC polices how companies comply with corporate governance codes.

“There are lots of people out there who believe the annual report is too long and a document that is struggling to have an identity,” George said.

The watchdog said it was launching a project to challenge existing thinking in corporate reporting and called for participants to join an advisory group by mid-November.

The different types of corporate communications from companies will also be examined.

The FRC will publish its thinking and any suggestions in the second half of next year, which may need legislation to implement. It may set out ideas before then as they emerge to aid discussion.

George said the mantra at the FRC has been for the annual report to tell the story of the company and where it’s headed.

The project will look at the purpose of an annual report at a time of rapid advances in how technology delivers information to investors, such as via apps on smartphones.

“New models for corporate reporting will inevitably lead to consideration of how audit and assurance models will need to evolve to respond to the changes,” George said.

The FRC suggested in the past that companies should not have to publish the annual report in physical form, but was met with a barrage of complaints.

“That is something that needs exploring. I don’t know today how many shareholders elect to carry on receiving a hard copy of the annual report,” George said.

Reporting by Huw Jones; Editing by Susan Fenton