The Annual report is viewed as a formal publicly avaible document produced by publicly listed companies as a result of the mandatory corporate reporting requirements that exsist in many economical environments. Readers of annual reports place high
credibility in corporate annual reports (Moskowitz, 2000).The corporate report has evolved over the years from a pure set of finacnical information into the glossy 80 page plus documents of design media. The evolution of these documents into the highly sophisticated piece of design work has occurred to proactively create a visibility and meaning, to communicate a constructed reality, rather than providing "what was there"(Hopwood 1996, Hines 1988). Hines argues that we create "a picture of an organisation ... and on the basis of that picture ....people think and act" the information presented to users of the annual report is contructed in such a way that it creates a picture of a constructed reality, a reality that users except when they respond to these documents (Hines 1988). Additionally Bekey 1990 suggests that these documents represent a sophisticated marketing tool being used to imprint organisational imagery onto the relevant users (Neu et al 1998). Annual reports use management, marketing and communication theory to contruct orgainsational imagery which is provided to the public users, academic theory on the use of the document as vechiles of communication with customer, shareholder, employees, suppliers media and government is documented by Judd and Tims 1991 where as Anderson and Imperia 1992 view the report as a method of communicating the "personality and philosophy of the firm".
As a formal communication document, annual reports commonly comprise quantitative information, narratives, photographs and graphs. Over the years an order to the disclosure of information has arsien, a dedicated mandatory field on the financial statements which is frequently represented at the rear of the document and a front section largely dedicated to non statutory information. Barlett and Jones 1997 report that in twenty year period starting in 1970 the annual reports content expanded rapidly as a result of changing requirements from regulatory bodies. Whilst the increase in statutory information was cleary justified due to regulation, the expansion of volunatary information sections was seen as a movement towards the public relations interaction of the document. Some opine that the narrative section is the most important aspect of the
annual report (Canniffe, 2003).Corporats social responsibility disclosure made up a significant increase in the document size, narrative sections were being replaced with large imagery and pictorial forms in high resolution colour( lee 1994), and design consultants became a significant expenditure for companies producing annual reports. 94 percent of the annual reports of FTSE 250 comapnies in 1999 were carried out externally by design aganecies. ( Valentine 1999) With the movement of the document to significantly large marketing tool for the company graphical imagergy saw a significant increase as well, Jones 1996 states that the modern corparte report is "unlikely to be impartial and........likely to be used by management to give a more favourable impression of corporate performance than is warranted" a significant aspect to providing more favourable impressions is the use or even miss use of graphical literature in annual reports. Corporate auditors closely observe and apply exacting governmental
standards to the accuracy of the data in the financial section. In the U.S.
and for foreign countries trading in the U.S. market, in the U.S. in 2002
the government legislated that the Public Companies Accounting Oversight
Board regulate the auditing process (Public Company Accounting
Oversight Board, 2007). Little oversight is required, however, over what
may or must appear in the narrative section or how it is delivered. This
section ranges from no narrative section at all to a brief message from
management to dozens of pages that can dwarf the financial section. In
addition to varying in length, the narrative section may also vary by depth,
type of content, and message format and physical appearance.
The Variation in these narrative sections, will be related to fianicial performance factors that the company is experience, for example a company that has experienced an unforeseen impact on finaicial expenditure for a particular reason may provide the necessary disclosure for such an act, however if the performance of the company is optimistic then the display of high contrast colourful graphical material will possibly be used to enhance the situation. Financial graphs in this respect are used significantly and have a wide bearth when it comes to the control of useage within the corporate report. Finaicial graphs are designed largely by graphic designers externally contracted by the company to provide a service, the graphical design has a large incentive to manipulate the perception of the data in the graph through a variatiety of mediums suchs as colour, scale, emphasis size and graphical type amongst many others. Authors that provide information on financial data as an act of art have little regard for data integrity and this in lies the problems of reading graphical information. (Beaudet 1998)
Users of the annual report vary extensively, from equity investors and portfolio managers skilfully anlyasising every detail of the reports to mere casual users looking to invest in a particular company. The graphs used in reporting tend to be aimed at the casual user of the reports, those more easily influenced by impressive graphical representation of financial performance rather than the raw data. David reports that investors typically spend a relatively short time studying the annual report, approximately 15mins goes towards their decision making process(David 2001) with a large majority of investor typically looking at only narrative material rather then the financial statements, Zweigh documents a significant proportion only look at the financial graphs, indicates the movement of the report away from the mere financial statements containing the facts and figures, the original purpose to the reports, towards a marketing tool showing fancy photography, graphs showing upward trends and large narrative material discussing the ethical responsibilities of the company. (Fisher and Hu 1989)
Whilst much debate surrounds the subject of corporate reports and the use of financial graphs, they play a significant part in the perception of the corporation, and how the company can portray its financial performance. This assignment will look at the impacts that financial graphs have had on the annual report, and an anylsis of the misuse of graphs in annual reports. Provide a co
An analysis of the literature would identify how the graphics guide and
potentially mislead the viewer, present the prevalence of the graphics, and collect
and categorize what we know about graphics and annual reports in the business communication literature. Within the examination of graphics, we are primarily concerned
with the use and misuse of these graphics in annual reports.
(a) selection, preparation, and manipulation of the visual support; (b) issues related to accountancy; (c) international applications;
and (d) annual reports and communication. Many studies may be
found in more than one category. When this overlap occurs, results of that
research are placed in the primary theme.
Evaluation
The Graph Discrepancy Index (GDI), which originates from the lie factor introduced by Tufte (1983), is the mechanism commonly used in the financial graphics literature to determine whether graphs are distorted and to quantify the extent of such distortion. Whilst the GDI is critical to the financial graphics literature, little or no attention has been paid to its robustness and accuracy. We critically examine the mathematical characteristics of the GDI and show its limitations as a measure of graph distortion. We review a number of cases to demonstrate these limitations. We present an alternative measure of graph distortion, the Relative Graph Discrepancy index (RGD). Numerous simulations suggest that the RGD overcomes the problems associated with the GDI. The RGD is also tested on data presented in earlier research and the results are compared to those obtained using the GDI. In comparison with the GDI we find that the RGD is more consistent and produces slightly stronger results. We stress however that this is not a best or definitive measure but is intended to start a research process that leads to a generally accepted measure.
