One of the other subjects to muse about in the ‘Forward-Looking Statements’ in annual reports is the length of these statements. [1] Some are excruciatingly long over 1100 words. The shortest one I found was Abbott’s with 135 words, but even this is not so much difficult to read, but ever so dull. “CAUTIONARY STATEMENT…
Another part of annual reports which nobody ever reads is the ‘Cautionary Statement Regarding Forward-Looking Statements’. So I decided to read a few [1] and see what I could find to muse about. The law apparently requires companies to make these cautionary statements, but there is no consensus on which law applies. The wisest don’t…
Everybody has to pay taxes so taxation is business as usual, but some companies consider taxation a risk with statements like this: They “ worry about potentially negative consequences from changes in or interpretations of tax laws and how they might affect the results of operations, cash flows and financial condition.” But Johnson & Johnson…
I was taught that internal control was the processes around the safeguard of company assets. But that was in the 1970’s, and life has become more complicated since then. So complicated that accountants now disagree on what internal control really is. Or to be more precise British accountants have a different definition to American ones….
I try to make the dry subject of internal control easy to understand with this analogy. Did you put on the alarm and lock the door when you left home this morning? If you did, you not only have a sound personal ‘internal control’ system, but it is working. If you forgot to put on…
Some mystery exists around risks not recognised by a few but recognised by many. The mystery arises from those who decide NOT to include them as risks. For instance out of the eight pharmaceutical companies I compared [1], six included the risk of not being able to hire and keep key employees, while two did…
Non-accountants might consider it logical that audit reports in the UK are seven times longer, than those in USA or Europe, sometimes even longer. [1] After all, auditors in the UK certify that financial statements are TRUE and fair whereas they only need to certify they are FAIR elsewhere, or to be more precise fairly…
One real risk relates to cyber security. Companies today cannot survive without adequate cyber protection. This risk gives them a chance to spray buzzwords in their risk statement, to fill out its importance and to show how serious it really is. The list is long: ‘cyber attack, malicious intrusion, breakdown, destruction, loss of data privacy,…
I recently discovered a new accounting term in the 2022 annual report of Associated British Foods: headroom. I had always thought this was the space between the top of my head and the ceiling. However a more figurative meaning of headroom does exist meaning: ‘freedom of action’, and perhaps accountants have adapted this meaning to…
A risk specific to the pharmaceutical industry, which is also business as usual, concerns patient safety. However governments worldwide have stepped in to control the industry. One could therefore argue that the risk moves from the pharmaceutical companies to the governments. And if all parties follow the regulations and if the regulations are adequate, the…