The association, which represents fund managers and City analysts, surveyed around 300 members on their views of the importance of the annual report and other forms of company reporting. It found that most respondents (60%) believe that financial reports contain too much irrelevant information, yet many (55%) suggest that at the same time they omit important information.

 However, most (71%) agreed that the quality of financial reporting has improved over the last 10 years.

A third (36%) of respondents said that the statutory accounts were their main source of financial information for analysing companies. However, CFA UK says a number of comments suggested that annual reports had ‘evolved into a corporate brochure and regulatory box ticking exercise’.

Half (47%) state that the area of the annual report that shows greatest need for improvement is the disclosure of principal risks and uncertainties. In addition, 35% described the ‘ethics committee report’ to be not at all useful.

CFA UK says the survey findings suggest non-GAAP reporting remains a contentious issue. Over half (61%) of respondents said they use IFRS adjusted numbers in their analysis. However, only a third (33%) say that they prefer non-IFRS measures over IFRS, with over half (56%) trusting the IFRS numbers more.

When asked to consider which items should be excluded from IFRS figures to arrive at a measure of underlying earnings, the majority of respondents (65%) were against exclusion of any of the items suggested. Two-thirds of respondents favour looking at both IFRS and adjusted numbers as the combination of the two offers greater insights into the company and its management.

Overall CFA UK says the biggest concerns that respondents have with regard to financial reporting related to the abuse of non-GAAP/IFRS adjusted earnings measures; excessive and redundant information in financial reporting; fair value movements obscuring underlying earnings measures; excessive focus on the income statement and not good enough disclosure of cash flows; and poor disclosure of off-balance sheet exposures.

Will Goodhart, CFA UK chief executive, said: ‘Despite the huge volumes of available data in the market, the statutory accounts remain the most popular source of financial information on a company. It is slightly concerning however, that they are seen to include more and more irrelevant information, whilst often omitting more pertinent detail. An inconsistent treatment of adjustments meanwhile, is often leading to an obfuscation of the underlying performance.’

The CFA report is here

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