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Is innovative communication techniques needed in the annual report ?

Is innovative communication techniques needed in the annual report ?. Agreeing Side Casey Lau Gloria Ho Hayley Cheng Hon Pok Man. Agenda. Definition of Communication Technique Objectives of Annual Report Communication Problems Recommendations Summary Conclusion.

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Is innovative communication techniques needed in the annual report ?

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  1. Is innovative communication techniques needed in the annual report ? Agreeing Side Casey Lau Gloria Ho Hayley Cheng Hon Pok Man

  2. Agenda • Definition of Communication Technique • Objectives of Annual Report • Communication Problems • Recommendations • Summary • Conclusion

  3. Definition of Communication Technique

  4. Definition of Communication Technique • Format e.g. tables, charts, graphics • Layout e.g. comparative figure, 5-year-summary • Presentation skill e.g. grouping, high-lighting trends, summarizing, selection of content, creative visual effects.

  5. Objectives of Annual Report

  6. Objectives of Annual Report Around the world, publicly traded companies publish annual financial reports in order to: • Inform and communicate objectively with shareholders, institutional investors, corporate bankers, and other potential investors about their performance, and • Fulfill the requirements of listing rules, and • Promote their public image and allow the public to know more about them.

  7. Objectives of Annual Report HKSSAP 2: “The primary objective of financial statements is to provide information that is useful to users for the purpose of assessing the financial position at a particular point in time and the performance and cash flows of an enterprise during a specified period of time and the stewardship of management during that period.”

  8. Current Communication Problems in theAnnual Report

  9. Information Overload • Dr. Meyer, professor of University of Flensbury Information Overload  sender provides more information than investors & readers are able to process

  10. Information Overload • Quantitative Information Overload • Size & number of information contained in annual report waste of time • Qualitative Information Overload • Complexity (e.g. use of jargons) & repetition (e.g. Director’s Report, Segmental on hand Operations Review) of information in annual report  hard to understand

  11. Misunderstanding and wrong decision Readability Problem Findings (e.g. by Smith, Gibson, Schroeder) have consistently revealed that the annual reports are generally: • At a reading ease level of difficult to very difficult e.g. use jargons • Beyond the fluent comprehension skills of about 90% of the adult population and 40% of the investor population.

  12. Language Barrier • Annual reports are usually in English • In Hong Kong, English is the second language • Use of jargons • Even though some annual reports are bilingual, since the education level of the majority of the public is not that high  cause barrier to understanding. [According to Govt’ stats, only 13% of the Hong Kong people have received tertiary education.]

  13. Recommendations& Benefits

  14. Recommendations • 2 main changes : (1) From a prospectus only  A package of : (A) Prospectus + (B) CD-Roms (2) From scanned AR on the Internet  Web-based Annual Report

  15. Recommendations for CD-Rom • New content component • New presentation technique : • From narrative to visual  a tool to enhance Annual Reports’ understandability

  16. Recommendations for CD-Rom (A) CONTENT : • From narrative disclosure of non- financial info. to visual & audio e.g. notice of AGM, directors’ report, auditors’ report, etc. ** low reading ease, but a better predictor than financial Info.  video + power-point

  17. Sample of visual aids Directors’ Report • Employees • Directors’ Bibliography • Directors’ Interest in Contract Previous Next

  18. Recommendations for CD-Rom • (A) CONTENT (2) Voluntary disclosure : • from prospectus to CD-Rom

  19. Recommendations for CD-Rom (A) CONTENT (3) Provides links as references e.g. financial analyst website, accounting-related references, auditors’ information  hyperlink attached

  20. Recommendations for CD-Rom (B) PRESENTATION TECHNIQUE (1) Graphical presentation : e.g. 5-year financial summary & highlight  presented by animated graphics, tables & charts in colour

  21. Recommendations for CD-Rom (1) Graphical presentation (con’t) : Example

  22. Benefits of CD-Rom (1) Video + power-point : • more understandable • listening VS reading • selective reading • point-form & simple & shorter words • easier to absorb & more interesting • within fluent comprehension

  23. Benefits of CD-Rom • Voluntary disclosure : • Selective reading • Less information overload in prospectus • Links : • As a supplementary aiding device

  24. Benefits of CD-Rom (4) Graphical presentation : • solve language barrier problem •  technical languages & terms • assist unsophisticated users • comparative trend & figures displayed • summarize information • focus comprehensive overview • show big picture

  25. Benefits of CD-Rom (4) Graphical presentation : •  reading time • more interesting cause animated & visualized • colour help highlight & reinforce • seize attention

  26. Recommendations for AR • Remain what we have now; • having no big change, with jargon terms • Comply with mandatory requirements and professional • + a summary financial statement • - voluntary disclosure  CD-Rom

  27. Summary Financial Information • Condensed Consolidated Statement of Earnings • Condensed Consolidated Balance Sheet • Condensed Consolidated Statement of Cash Flows • Notes to Condensed Consolidated Financial Statements • Report of Independent Auditors and Accountants • Selected Financial Data

  28. Selected Financial Data

  29. Benefits of AR • People feel more comfortable if there still a book hold on hand

  30. Recommendations for web-based AR • Clear presentation of figures instead of copies of scanned AR • Music, pictures • Reference links (e.g. comments from some analysts) • Video clips of press conferences • Interactive design (e.g. Flash) • Power search • Guided tour -> similar to MS office assistant

  31. Benefits of web-based AR • Computer help generate more sophisticated information • More interesting to read • Selectively read the information wanted • More info. given (e.g. video clips, reference links) • Better quality of figures presentation

  32. Summary • CD-ROM and internet help the reader analyze the meaning of the AR • Multimedia: • 1. reduce information overload problem • 2. Help lower-educated people • 3. Promote the interest in reading AR

  33. Summary • How the multimedia helps: • 1. Use graphics, videos- understand meaning with an interest involved • 2. No more words required: reduce time to analyze the company

  34. Summary • Why multimedia can help: • 1. Evidence shows- people memorize images better than words. • 2. Good relationship with the company, good images can be enhanced

  35. Conclusion • Innovative communication technique: improve decision making quality • Investors- more logical decision making • Multimedia- help investors understand the company better

  36. Our decision More innovative communication technique should be used in the annual report!

  37. ~ The End ~ Thank You !

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