Prioritising Disclosures in the Annual Report

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Drawing upon information economics, this paper presents a relative assessment of 24 of the most common disclosure items in the management commentary and notes sections of the annual report. We design and conduct an Internet survey using a large representative sample of users with an investment focus (n = 288) and preparers of annual reports (n = 89). Using cost-effectiveness analysis, an evaluation method widely used in healthcare economics, the balance between preparation costs and user satisfaction, relative to user demand is assessed. Our main findings show that corporate social responsibility and corporate governance, the least demanded disclosure items in the management commentary, are also costly items to prepare. Further, preparers do not consider indirect costs (i.e. competitive position costs and potential litigation costs) of information provided in the management commentary to be a major concern. With regard to the notes, we find that business combinations (IFRS 3), financial instruments (IFRS 7) and impairment tests (IAS 36) are highly demanded but are also among the items most costly to prepare, and users are less satisfied with these notes. The findings have important implications for practitioners and policy-makers and can be used for setting priorities.
Original languageEnglish
JournalAccounting and Business Research
Volume43
Issue number6
Pages (from-to)605-635
ISSN0001-4788
DOIs
Publication statusPublished - 2013

Cite this

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title = "Prioritising Disclosures in the Annual Report",
abstract = "Drawing upon information economics, this paper presents a relative assessment of 24 of the most common disclosure items in the management commentary and notes sections of the annual report. We design and conduct an Internet survey using a large representative sample of users with an investment focus (n = 288) and preparers of annual reports (n = 89). Using cost-effectiveness analysis, an evaluation method widely used in healthcare economics, the balance between preparation costs and user satisfaction, relative to user demand is assessed. Our main findings show that corporate social responsibility and corporate governance, the least demanded disclosure items in the management commentary, are also costly items to prepare. Further, preparers do not consider indirect costs (i.e. competitive position costs and potential litigation costs) of information provided in the management commentary to be a major concern. With regard to the notes, we find that business combinations (IFRS 3), financial instruments (IFRS 7) and impairment tests (IAS 36) are highly demanded but are also among the items most costly to prepare, and users are less satisfied with these notes. The findings have important implications for practitioners and policy-makers and can be used for setting priorities.",
keywords = "Annual report, Cost-effectiveness analysis, Disclosure, Management commentary, IFRS, Notes",
author = "{Riise Johansen}, Thomas and Thomas Plenborg",
year = "2013",
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language = "English",
volume = "43",
pages = "605--635",
journal = "Accounting and Business Research",
issn = "0001-4788",
publisher = "Routledge",
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}

Prioritising Disclosures in the Annual Report. / Riise Johansen, Thomas; Plenborg, Thomas.

In: Accounting and Business Research, Vol. 43, No. 6, 2013, p. 605-635.

Research output: Contribution to journalJournal articleResearchpeer-review

TY - JOUR

T1 - Prioritising Disclosures in the Annual Report

AU - Riise Johansen, Thomas

AU - Plenborg, Thomas

PY - 2013

Y1 - 2013

N2 - Drawing upon information economics, this paper presents a relative assessment of 24 of the most common disclosure items in the management commentary and notes sections of the annual report. We design and conduct an Internet survey using a large representative sample of users with an investment focus (n = 288) and preparers of annual reports (n = 89). Using cost-effectiveness analysis, an evaluation method widely used in healthcare economics, the balance between preparation costs and user satisfaction, relative to user demand is assessed. Our main findings show that corporate social responsibility and corporate governance, the least demanded disclosure items in the management commentary, are also costly items to prepare. Further, preparers do not consider indirect costs (i.e. competitive position costs and potential litigation costs) of information provided in the management commentary to be a major concern. With regard to the notes, we find that business combinations (IFRS 3), financial instruments (IFRS 7) and impairment tests (IAS 36) are highly demanded but are also among the items most costly to prepare, and users are less satisfied with these notes. The findings have important implications for practitioners and policy-makers and can be used for setting priorities.

AB - Drawing upon information economics, this paper presents a relative assessment of 24 of the most common disclosure items in the management commentary and notes sections of the annual report. We design and conduct an Internet survey using a large representative sample of users with an investment focus (n = 288) and preparers of annual reports (n = 89). Using cost-effectiveness analysis, an evaluation method widely used in healthcare economics, the balance between preparation costs and user satisfaction, relative to user demand is assessed. Our main findings show that corporate social responsibility and corporate governance, the least demanded disclosure items in the management commentary, are also costly items to prepare. Further, preparers do not consider indirect costs (i.e. competitive position costs and potential litigation costs) of information provided in the management commentary to be a major concern. With regard to the notes, we find that business combinations (IFRS 3), financial instruments (IFRS 7) and impairment tests (IAS 36) are highly demanded but are also among the items most costly to prepare, and users are less satisfied with these notes. The findings have important implications for practitioners and policy-makers and can be used for setting priorities.

KW - Annual report

KW - Cost-effectiveness analysis

KW - Disclosure

KW - Management commentary

KW - IFRS

KW - Notes

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DO - 10.1080/00014788.2013.827105

M3 - Journal article

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JO - Accounting and Business Research

JF - Accounting and Business Research

SN - 0001-4788

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