NARRATIVE REPORTING

Current Value of Narrative Reporting in Financial Accounting



Current Value of Narrative Reporting in Financial Accounting

In the past few years, financial reporting and accounting standards, have witnessed a lot of tinkering. A global push established through compliance-driven standardization practices has failed to satisfy the needs of investors and analysts to accurately assess corporations, their numbers and future prospects. Models on reporting, are globally debated for some time now, and a growing urge towards narrative reporting is observed. It is argued that corporate performance and its sustainability can be aptly portrayed through narrative reporting (PWC, 2007, pp. 4).

Narrative reporting provisions a meaningful and broad assessment of company's business. Quantified metrics, performance, strategy, market position and future outlook are critically contextualized, coupled with non-financial and relevant financial information of the company. Narrative reporting is an ideal mechanism to project a differentiated and commercially attractive depiction of the business. This type of reporting format would strengthen stakeholder and investor relationships. Further, board effectiveness and governance would be enhanced by adhering to the process flow of generating narrative reporting practices (Hussainey, 2012; PWC, 2017, pp. 4).

Birnbaum while analyzing mandatory public reporting practices observed that unsubstantiated assumptions and critical knowledge gaps plagued the mandatory practice of public reporting. The author recommended narrative reporting techniques to assuage the problem areas. Further, role delineation and better research is to be observed in the process (Birnbaum, 2012, pp. 113). Birnbaum's assertions are backed by Peter Yeoh. Yeoh wrote an article discussing the narrative reporting practices of UK companies, with view to its quality. Yeoh concluded that such reporting practices in UK companies are in general transparent and of higher quality, when supported with narrative reporting formats. Though, some reporting areas are observed to carry weaknesses; further limitations in creative reporting are also detected (Yeoh, 2010, pp. 211). Similar ...