Financial Reporting Essay Example | Topics and Well Written Essays - 2500 words - 2

Financial Reporting - Essay Example Here the items are specific and these are compared over a specific accounting period. This method can further be classified into two sub categories, namely absolute dollar and percentage comparison (Edmund, et.al., 2006). b) Vertical Analysis: The vertical analysis on the other hand is when the analysts use separate figures to one specific figure of a financial report. This comparison is generally performed in percentages. Here unlike the horizontal analysis, the analyst use one certain item and compare several different items with it, in the same accounting period. This is generally used to gather enough data to build a trend. This method is also divided into two main styles, income statement analysis and balance sheet analysis (Edmund, et.al., 2006). Narrative reports in annual reports are a very useful tool. These often cover a number of different aspects of the annual report. The narrative reports have been taking up higher portions of the annual reports. It has been noted by Deloitte research that these take up as much as 54% of the total annual reports (Reed, 2008). The role of the narrative reports is very clear, it is mainly present in the annual reports to provide the readers with a clear knowledge of the history of the company, a brief analysis of the changes made in the year, future plans of the company and also the illustrations and photographs that are relevant. This forms a source of information for the readers and to some extent can be considered to be a monologue. The role is to provide for a complete overview of the company. In terms of the analysing the financial statements, these reports provide the analysers with straight forward information. It includes a five to ten years of financial summary which proves to be very beneficial especially if the analyser aims at gaining comparative information over a few years of historical data of the company (Bear,