Annual Report Readership and Understanding: An International Comparison

A J Robb, Y P Shanahan and B R Lord

This paper extends the initial research reported in Lord et al (2005) on the readership of annual reports by members of co-operatives. Lord et al (2005) surveyed members of a New Zealand (NZ) supply co-operative, whereas this study is of two United Kingdom (UK) consumer co-operatives.

The analysis establishes that there are differences in readership and understanding of annual reports, depending on the type of co-operative and possibly the country culture. Information about profits/earnings is the most important item provided by annual reports. UK readers ranked rebate information much lower than NZ readers. UK respondents read narrative portions more thoroughly (a confirmation of the findings of Lee & Tweedie, 1977), whereas NZ respondents read the numerical financial sections most thoroughly. The thoroughness of reading of annual reports was positively correlated with understanding of accounting terms and also positively correlated to the reading of three or more other sources of information about companies. Respondents with a more extensive accounting background showed more understanding and read the annual report more thoroughly. The majority of respondents considered that the annual report contained sufficient information for members, but some suggestions for additions and improvements were offered.