Problem 1.2
a. The annual report is considered a one-way communication report. This means that is needs to
be as clear and precise since they do not receive feedback from the ones who are to be reading
it. The intended audience needs to be identified. Stockholders, future investors, management,
production, and others will be looking at the report and interpreting it the way that it means to
them. This way the preparer can determine the correct language and wording that would be
easiest for the audience to receive the information. It needs to be organized and visually
appealing to keep the reader from being confused.
b. Companies have several different readers of their financial reports so they tailor the reports to
fit the audience they know and think may be reading. They need to be able to make sure that
the report is written that can be interpreted correctly by all the readers. Sometime this may
cause the report to become long and complex trying to add information that is relevant to all
the readers. This can cause the report to have information that some readers do not
understand or have a hard time comprehending due to information overload. Diagrams or
charts that are added might have some use for a group of readers but might not be
understandable by others.
c. Other than the financial statements and accompanying footnotes, annual reports can include
future strategies that management are going to implement. This is useful to investors to
understand the direction the company might be heading. There could also be information on
production of goods. This can affect current or potential suppliers of raw goods that are needed
for productions. If they are going to change technology that might need a different kind of raw
goods to make the same product.
