Narrative reporting
Narrative reporting

Author(s): Katarzyna Czajkowska, Marek Masztalerz, Ana Rep
Subject(s): Economy, Business Economy / Management, Energy and Environmental Studies, Theoretical Linguistics, Accounting - Business Administration, Marketing / Advertising, Business Ethics
Published by: Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu
Keywords: accounting;communication;language;materiality principle;narrative reports;narratives;reporting accounting;transparent reporting;
Summary/Abstract: For years financial and management accounting reports were based primarily on “hard” numbers. Extensive written descriptions and explanations were not common in practice. However, inrecent decades there has been a significant shift towards “softer” and more narrative communicationin accounting. The purpose of the chapter is to identify and describe the determinants of the developmentof accounting narratives in practice, and to explain why narratives are gaining importance inaccounting communication. The chapter presents the links between accounting and language, the development of accounting narratives and the factors determining the use of narratives. Narratives give economic units the opportunity to explain the situation and the achieved financial results. The use of narratives helps to better meet the information needs of stakeholders. There are still many challenges ahead of narrative financial reporting, such as determining the minimum content of reports, ensuring comparability of reports or the issue of external control of narrative financial reporting. An insufficient application of professional accounting materiality judgment is considered as one of the main causes of disclosing too much irrelevant information and not enough relevant information. Preparers of narrative reports should be aware that without applying materiality principle the information disclosed in the reports are not considered transparent and stakeholders lose confidencein such companies.

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