Investigating presentational change in U.K. annual reports: a longitudinal perspective.

At a broader level, the annual report appears to have changed beyond all recognition over the past generation. Accounting is not a neutral, static activity; rather, it is a constantly evolving, socially embedded practice. In 1965, annual reports were relatively compact documents (26 pages), clearly centered around a hard core of financially regulated data with financial statements being afforded the central primacy, and presentational aspects taking a backseat. Today's annual reports, by contrast, are lengthy (75 to 95 pages) and dominated by voluntary data that dwarf the financial statements in both quantity and prominence and with presentational aspects being pushed to the fore. These changes are consistent with the view that the annual report's function has largely changed from a regulated, financial document to a presentation-driven impression management tool. As a consequence, investors should exercise caution when reading these documents. In addition, regulators should consider more actively intervening to ensure that the voluntary status of the reports is more closely scrutinized by auditors.

Additional future research is required to understand more closely the longitudinal nature of change in annual report design. Possible lines of inquiry include a detailed investigation of a small number of companies (case studies); an examination of changes in practices over time in other countries, such as the United States or those with emerging economies with economic climates and institutional environments that differ from those found in developed countries; an exploration of how company-specific determinants of disclosure (e.g., company size, industry, cross listing) influence practice; and an exploration of the impact of these changes in accounting practice on different stakeholder groups. Taken together, such research would enable us to better understand the factors that drive reporting change and its influence on stakeholder behavior.

The authors thank Gillian MacIver and Jenna Yeap for their research assistance and are also grateful to participants at the British Accounting Association Conference (Royal Holloway, April 2007) and the Accounting, Business and Financial History Conference (Cardiff, September 2007) for their comments. We also are appreciative of the very constructive comments from two anonymous reviewers and the special issue guest editor, John Penrose. Vivien Beattie is a professor of accounting at the University of Glasgow. Alpa Dhanani is a lecturer in accounting at Cardiff University. Michael John Jones is a professor of financial reporting at Cardiff University. Correspondence concerning this article should be addressed to Alpa Dhanani, Cardiff Business School, Cardiff University, Aberconway Building, Colum Dr., Cardiff CF10 3EU, United Kingdom; e-mail: Dhananiav@cardiff.ac.uk.

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