留学生会计专业作业Communication issues in international accounting
Communication issues: voluntary disclosures & impression management
Changing form of annual report/review
Dual reporting – report AND review
Greater non-accounting content (Lee, 1994; Davison & Skerratt, 2007)
Mandatory v voluntary
Confusion
Reliability
Readership - lay v expert - what are they reading?
Lay – Bartlett & Chandler (1997)
Expert – Barker (2000); Breton & Taffler (2001)
Communication issues (contd) Impression management in voluntary disclosures
Graphs (eg Beattie & Jones,1992)
Communication advantages - powerful
Potential bias
User perceptions
Need to compare to accounts
Narratives (eg Courtis, 1998; Clatworthy & Jones, 2003)
Readability review
Variability within Chairman’s statement
Good/bad news & Chairman’s statement
Pictures (eg Preston & Young, 2000; Davison, 2007; 2009; 2010)
Powerful, like graphs
Difficult area because of ambiguity, subjectivity.
Introduction & background
Graphs
Communication advantages
Potential bias
User perceptions
Narratives
Readability review
Variability within Chairman’s statement
Good/bad news & Chairman’s statement
Pictures
Summary
Introduction & background - 1
Change in form and content of annual report (Lee 1994; Davison & Skerratt, 2007)
Annual Report v Review
Move to qualitative narratives
OFR (Operating & Financial Review) was to be mandatory (UK)
MD&A (Management Discussion & Analysis) is required (US)
Emergent ‘Management commentary’ (IASB) – guidance only
New reporting models for business ICAEW 2003
Accountants and ‘communication apprehension’
Who are the users and what do they want?
Bartlett & Chandler (1997) Corporate Report & Private Shareholder - mainly read Chairman’s Statement
Barker (2000) Use by analysts - demonstrate little understanding of accounts
Breton & Taffler (2001) Analysts - use ‘soft qualitative information’
Courtis (2000) ‘Perception engineering’
‘Accountants need to become as sensitive to the presentation of information as they are to its content’
Traditional training disregards presentation
Accountants seen as credible interpreters of information
Increasing qual. disclosures
Increasing sources of info
Voluntary disclosures
Unregulated, except that an ASB Discussion Paper 2000 on Communication recognises graphs to be a ‘powerful communication tool’
Graphs: communication advantages
See Beattie & Jones (1992;2002)
Graphs attract attention, are ‘graphical sound bites’
Graphs rely on spatial intelligence - enables perception of comparisons, trends, anomalies
Graphical data can be readily retrieved
Provide oases of colour and interest
Graphs: potential biasSelectivity in graphs shown
Selectivity of time series
Measurement distortion Beattie & Jones (1992) pp. 295-6 - trend exaggeration
Elaborate formats
Positioning of related commentary
Regulation varies – eg
Notes to accounts are regulated
Corporate governance disclosures are regulated
OFR is best practice as per the Accounting Standards Board (Reporting Statement 1 – persuasive, not mandatory)
Chairman’s statement is custom and practice on the part of management – not regulated except for the auditing ‘consistency’ requirement
Narratives and readability studies
Jones & Shoemaker (1992)
Use indices (eg Flesch, Fog, Lix) (dubious instruments)
Find annual reports’ readability difficult/v.difficult
Find Chairman’s Statement/President’s Letter more readable than footnotes
Annual reports less readable than employee reports
Have become harder to read over time
Courtis (1998) - no link readability/financial results
Lix index to measure readability
The LIX Formula
LIX = W/S+(100*LW)/W
Where: LIXLIX index score
W Number of words
LW Number of long words (7+ characters)
S Number of sentences
LIX Index Table
0-24 Very easy
25-34 Easy
35-44 Standard
45-54 Difficult
55 and above Very difficult
Courtis (1998)
There is variability
First 100 words the easiest
Last 100 words middle difficulty, Middle passage the hardest.
So – is there obfuscation?
No association found between variability/results
Positive association harder readability/greater press coverage - because in ‘public eye’
Clatworthy & Jones (2003)
Improving performers more good news than bad news
Declining performers do not dwell on bad news
All performers accentuate the positive
All performers attribute the cause of the news to reflect well on themselves. If good, to themselves; if bad, to the external environment (‘Attribution’ analysis)
Auditors’ reports - no mention of inconsistency
Remain almost totally unregulated (except for ‘consistency’ audit requirements; often excluded from opinion)
Remain almost totally unresearched.
What messages do they convey? We have no clear answers.
Huge variety of messages conveyed simply or artfully. May portray brands, other intangibles, or be more concerted perception engineering.
Davison (2007; 2008; 2009)
Preston & /Young (2000)
22 pictures from annual reports around the world
Examines
Ethnoscape
Technoscape
Finance scape
Landscape
Communication a burgeoning issue in international accounting
Growth of non-accounting content of annual reports
Confusing regulation
Do the messages in graphs/narratives/pictures
reinforce financial results?
communicate broader issues?
represent impression management?