Despite attempts by the accounting regulator, the Financial Reporting Council, to curb the amount of information required in annual reports with its Cutting the Clutter campaign, the size and scale of reports continues to grow for the sixth successive year with the average annual report coming in at 135 pages.

There is also a clear trend that companies are being slow to move to new UK GAAP, with many considering the move to the reduced disclosure approach available under FRS 101, Reduced Disclosure Framework. This is despite the fact that old UK GAAP is no longer available for periods commencing on or after 1 January 2015.

There is a trend for companies that currently use old UK GAAP for their parent company or subsidiary financial statements to adopt FRS 101 ‘as this is likely to be less onerous than moving to full EU-adopted IFRSs for the company-only financial statements’, according to Deloitte.

However, half of the companies surveyed (51) are still using old UK GAAP for parent company financial statements, and of these only 12 have disclosed their intention to adopt FRS 101 next year.

Just two companies have already made the switch to FRS 101, for which they need to write to shareholders and inform them of the change.

Deloitte says that companies which have yet to gain shareholder approval for adopting FRS 101 will need to take action quickly, or will have to either adopt International Financial Reporting Standards (IFRS) in full or apply FRS 102, Financial Reporting Standard applicable in the UK and Ireland.

The analysis also shows that linkage remains a weak element in many annual reports, with only 10% showing clearly how all the various elements of the report work together. Deloitte says that listed entitities need to demonstrate a coherent thought process when structuring and writing the report, not just cross referencing some items.

Veronica Poole, partner and head of corporate reporting at Deloitte, said: ‘This builds on the efforts of over half the companies who are now talking about a wider range of inputs and outputs as part of their business model in a move towards integrated thinking.’

While the use of alternative performance measures continues to be an essential part of telling a company's story, Poole points out that the FRC has previously voiced concern around over-prominent presentation of non-GAAP measures.

‘Worryingly, 54% of companies gave more prominence to these adjusted measures than to the statutory numbers. Also, 42% of those companies adopting alternative performance measures as key performance indicators did not reconcile these clearly to their financial statements,’ Poole said.

On integrated reporting, adoption levels were very low, despite efforts to promote the concept to companies, with only 7% of respondents having adopted integrated reporting or being in the process of doing so.

The survey of 100 UK listed companies found that the average UK annual report is now 135 pages, up three pages on last year and nearly 40% longer than the average 2006 annual report at just 85 pages.

On average financial statements were only two pages shorter, so the ‘clear and concise’ approach is taking time to have any impact on current practice. 

Overall, the biggest page growth was in front-end narrative reporting with non-GAAP alternative performance measures taking greater prominence.

Deloitte’s Annual Report survey is available here

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