How to enhance the design and usability of digital annual reports

The UK's Financial Reporting Council (FRC) Lab published a report that shares lessons learned from the first year of mandatory structured digital reporting under guidelines from the Transparency Directive of the European Single Electronic Format (ESEF) regulation.

The report from the regulator states that digital reporting "will only achieve its intended objective if the resulting structured reports are of high quality and are usable in practice".

The report found that many companies have risen to the challenge of producing an annual financial report in the new digital format. "However, there is still much to be done as data quality and usability remain below the level expected for companies in a leading capital market," according to an FRC news release.

In October 2021, the FRC offered a first look at practical guidance for companies to produce the annual reports in a structured electronic format.

Mark Babington, executive director of regulatory standards at the FRC, said in a 23 September news release that it was encouraging that companies seem to have put to use the tips from last year's early implementation review. "There is of course room for improvement, and the actions in this report will help companies to make their reporting fit for increasing digital consumption. A focus on data quality and usability will be key to achieve this," Babington said in the news release.

The report offers advice in three sections for how companies can improve their reporting: process, usability and design, and tagging.

Process

Many companies need to improve:

• The naming and structure of file(s) submitted to the National Storage
• Their review and governance processes — more engagement and education are needed, including at the management and board levels.

Better practice would be to:

• Focus on data quality and consider internal or external assurance.
• Consider structured reporting as an integral part of the annual reporting process, rather than a bolt-on.
• Adopt a continuous improvement mindset and ensure the annual reporting process is future-proof.
• Keep the filings submitted in different jurisdictions as consistent as possible and clearly label the different versions.

Usability and design

More companies need to improve:

• The usability of the report, by making a validated report available on the company's website with an inline viewer.
• The timing of their report — the deadline is reverting to four months after year end, which means many companies may need to speed up the process from this year.

Better practice would be to:

• Minimise the time lag between the results announcement and the filing of the structured report.
• Minimise the report loading time.
• Go beyond the limits of the paper report and design with digital users in mind.
• Ensure the structured report meets accessibility standards.

Tagging

More companies need to improve:

• Their selection of tags, including by focusing on the accounting meaning of their disclosures and by avoiding unnecessary extensions.
• The selection of appropriate anchors for extensions.
• The completeness of calculations.

Better practice would be to:

• Start testing text block tagging of the notes now.
• Review peers' tagging.
• Voluntarily tag some notes in detail that may be of interest to users.
• Respond to relevant taxonomy consultations.

— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.