The Financial Reporting Council Defines Complexity

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The Financial Reporting Council defines complexity as ‘anything that makes regulations or the reports themselves unnecessarily difficult to understand, implement or analyse’ (Financial Reporting Council, 2009). Many areas of annual reports have been highlighted over the years as annual reports are seen to be getting more complex to both the users of accounts and the preparers. There have been many discussions as to whether annual reports are becoming more complex and harder to understand. An annual report is a detailed report for shareholders and other business partners on a company’s activities throughout the year. It is a legal requirement form the Companies Act 1985/9 that requires companies to publish their annual report and…show more content…
Financial information is seen to be relevant is it has ‘confirmatory value, predictive value, or both’ (Maynard, 2013, pp14). There are also four enhancing characteristics, which improve the usefulness of financial information. One of these characteristics is understandability which means that the information in an annual report should be ‘classified, characterised and presented clearly and concisely in order to make it understandable’ (Maynard, 2013, pp16). Other characteristics include comparability, verifiability and timeliness (Appendix 1). As there are many characteristics to satisfy in order to meet the demands of the users, the annual report is said to obscure important information and include ‘clutter (which) undermines the usefulness of annual reports and accounts’ (Financial Reporting Council, 2011). This then gives an unclear understanding of the issues a company actually faces, and raises the question as to whether these characteristics are right, as relevant information becomes more difficult for users to analyse a company’s progress. The financial statements are influenced by many different regulations, such as the Domestic legislation, the International legislation and rules, and for some companies that are listed, the stock exchange (Appendix 2). In an attempt to harmonise some of the rules and regulations the Conceptual Framework has been created, in
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