quality narrative reporting
TRANSCRIPT
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AAnnaallyyssiiss ooffQQuuaalliittyy NNaarrrraattiivvee RReeppoorrttiinngg
ooffSSccoottttiisshh aanndd SSoouutthheerrnn EEnneerrggyy PPllcc
Explaining the factors that determine demand and supply of houses in the UK
during the above period
For Assignment or Dissertation Help, Please Contact:
Muhammad Sajid Saeed
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Table of Contents1. Introduction ................................................................................................................................. 22. Quality of Narrative Reporting ................................................................................................... 2
2.1 Theoretical Aspects of Quality Narrative Reporting .......................................................... 33. Scottish and Sothern Energy (SSE) Plc ...................................................................................... 4
3.1 SSE Business Model and Strategy ...................................................................................... 43.2 Scottish and Sothern Plc Quality of Narrative Reporting ................................................... 53.3 Quality of Narrative Disclosure from Top Management .................................................... 63.4 Future Strategic Planning of SSE ....................................................................................... 63.5 Capital Investment .............................................................................................................. 93.6 Governance Strategy ......................................................................................................... 10
4. Conclusion ................................................................................................................................ 12References ..................................................................................................................................... 13
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1. Introduction
The main objective of narrative reporting is to provide a mechanism, which helps a firm to create
a more attractive commercialize picture of the business, which is in line with the better
understanding of stakeholders. It generates good governance, effective and better understanding
(Pricewaterhousecoopers, 2007). For many organizations it is considered mandatory to report as
it is the legal requirements impose on the company. Companies should provide voluntary
information and should consider it as the source of communication between company and
stakeholders (Adelopo, 2011).
Using Scottish and Sothern Energy (SSE) Plc, a company listed in the FTSE 350, this report with
the help of the previous academic literature and SSE annual report provides the brief evidence
about the business model of SSE. It highlights the value creation for its employees, customers,
and investors.
One aspect which is considered important in this assignment is the level of voluntary disclosure
of corporate finance and corporate governance. SSE provides the greatest level of information to
its stakeholders all the activities of the company can be accessed from their corporate website
and annual report. The assignment also illustrates that the stakeholders have easy access to the
information regarding performance of the corporation. Third the report provides that how firm
communicate financial performance to its stakeholder. At the end this assignment evaluates how
the SSE annual report is in line with IIRC agenda for integrated reporting.
2. Quality of Narrative Reporting
The quality reporting to shareholders and stakeholders i.e. Employees, Bankers, Regulators, and
society are important activity on the part of the management of the company. User friendly
narrative reporting and financial disclosure were first introduced in the form of operating and
financial review (Yeoh, 2010). A quality reporting contains the transparency of information on
the part of the organisation. In the global economy the awareness of the reader has increased and
the expectations of the annual reports have also increased so more you disclose more the comfort
to the reader. But quality of reporting is more important than quantity (Sarkar, 2011).
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International Integrated Reporting Committee (IIRC) has introduced the integrated reporting
system where the business provided the brief explanation for the firm value. The following
figure shows that the business report should create short, medium and long term value with the
help of reporting of better and integrated information about strategy and model of the business,
operating context of the business, current and past performance highlights and how these reflect
the aim of the organisation.
Figure 1. Ingredients of Integrated Reporting
Source: KPMG (2012)
2.1 Theoretical Aspects of Quality Narrative Reporting
Most of the previous study elaborates that the disclosures theories play an important role in
explaining the narrative quality. The signaling theory specifies the reduction in information
asymmetry with the help of information disclosure. The managers convey more information to
their current and potential customers (Haniffa and Cooke, 2002). On the other hand, agency
theory plays an important role in narrative disclosure (Healy and Palepu, 2001). Firm
management discloses quality narrative information to avoid the agency problem of management
with the shareholders and with the debt holders. The quality narrative disclosure also helps to
reduce the conflicts between shareholders and debt holders.
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3. Scottish and Sothern Energy (SSE) Plc
Scottish and Sothern Energys core purpose is to deliver energy resources to people in pure,
sustainable, and reliable way. The core value which SSE contains is security, safety, efficiency,
teamwork and excellence. SSE main objective is to preserve the rights of the shareholders while
providing them with the sustainable dividends and also to ensure efficient operations and
investment in energy production and services (SSE, 2012).
3.1 SSE Business Model and Strategy
SSE business model revolves around two main operational activities. First its business model
involves in generation, distribution, transformation and supply of electricity. SSE uses turbines
to generate electricity from oil, coal, water and gas. It uses line with high voltage to transmitelectricity to different networks and use line with low voltage to transmit electricity to homes,
workplace and different premises. It also involves in retailing the electricity to its commercial
users, business and industrial concerns and households.
Figure 2. SSE Business Model for Electricity
Source: SSE (2011)
Second SSE involves in gas retailing. It involves in gas production while extracting natural gas
from North Sea fields to use off shores. Also its store gas in underground caverns for the future
use. SSE is involved in gas transformation operations using gas pipelines to deliver gas to
different premises and SSE involves in retailing gas to small industrial and business concerns
and also households.
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Figure 3. SSE Business Model for Gas
Source: SSE (2011)
3.2 Scottish and Sothern Plc Quality of Narrative Reporting
For the narrative reporting the author has used 2011 annual report and some website information.
The narrative reporting of the SSE is quite clear its technological knowhow is unique. It has
communicated most of its activities on its corporate website. Figure 4 shows the regulatory news
page in the investor centre on the website. The figure shows the full disclosure of information
and user friendly interface, where users can easily access the current and previous prospects of
the company using the check boxes and also the information given in the list.
Figure 4. Investor Section at SSE.com
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Source: SSE (2013)
3.3 Quality of Narrative Disclosure from Top Management
The quality of disclosure of the report is quite significant. The questions answer part from
chairman, Lord Smith of Kelvin, and Chief executive, Ian Merchant, is intriguing. In the report
there are same asked questions from both of them which confirm the similarities and differences
in their opinions. The questions and answers give the brief narrative analysis about the
performance of the firm.
3.4 Future Strategic Planning of SSE
Figure 5 is the brief representation of the future planning of SSE from 2012 to 2023. This gives a
good understanding to the reader about the future prospects regarding strategic point of view
about the company.
Figure 5. Key Developments
Source: SSE (2011)
SSE main focus is to preserve the rights of its shareholders. The report has significant amount of
focus on dividend growth.
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Figure 6. Dividend Growth Prospects
Source: SSE (2011)
According to the report, the strength of the company is its shareholders and it ensures that there
will be persistent growth in the inflation above dividend to attract more investment from
shareholders. It also clears the clientele effect by sending the signal to the investors who are
more into stable income on their investment and who are risk averse. SSE develops all its
financial operations and statement to satisfy the needs of its shareholders.
Figure 7 shows the key Performance indicators of SSE with comparison to four years before. It is
clear to the mind of reader how clear and interesting the performance of the company in these
five years is. This ensures the quality of reporting on the part of the company. This data is
important to the financial and accounting professional to analyse the output of the organisation.
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Figure 7. Key Financial indicators
Source: SSE (2011)
The report also provides a narrative explanation of the financial performance of the company
which is in line with the IIRC (2013) framework.
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3.5 Capital Investment
One more thing which attracts the investors how much capital assets the firm have and how they
use these assets for the development and success of the business they are dealing with.
Figure 8. Performance of Capital Assets
Source: (SSE, 2011)
SSE has distributed electricity around 3.5 million businesses, homes and offices 130,000km
underground cable and overhead lines and also it has distributed gas to 5.7 million offices,
homes and businesses vie gas mains of 75,000 km. It is estimated that the regulatory asset value
(RAV) of SSEs economically natural business is over5.36 billion. This shows that SSE is able
to take out the maximum output from its operating and capital expenditure which may attract
new investors into it (SSE, 2012).
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Figure 9. Networks Regulated Asset Value for 2011
Source: SSE (2011)
3.6 Governance Strategy
A significant important part of the report is the information about the composition and the
hierarchy of the organisation. SSE has 11 boards of directors and 7 management board members.
The hiring and leaving of board is communicated regularly on the website. Important
information is the number of non-executive directors on the board. SSE has four non-executive
directors. SSE report clearly mentions the rights and duties of the directors and the management
board. Also their independence and responsibility which is a good sign for the quality narrative
reporting.
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Figure 2. Board Structure
Source: SSE (2011)
Figure 11 provides the structure of the board which is mentioned in the report. It gives the
elaborated picture of the governance structure of SSE.
Figure 3. Remuneration Policy
Source: SSE (2011)
The report gives the brief description about the remuneration policy of the firm and also it
ensures the reliability of this information by providing further information about the
remuneration of the board. The readers of the report have significant information regarding the
remuneration policy and get well aware about the remunerations of directors. This narrative
disclosure provides a great deal of authenticity with reference to IIRC agenda.
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4. Conclusion
The quality narrative disclosure of the firm has an ability to communicate the strong foundations
on which the organisation is based on.
Figure 4. Foundation for the Integrated Report
Source: IIRC (2013)
According to the report of SSE Strategic, their objectives look strong. The report provides all the
information, which is considered important for the stakeholders. The SSE business model is
quite clear and understandable to the readers. It also creates connectivity and signals better future
prospects for the company. Assessment and identification of risk factors and the provision of a
mitigation plan are also strong points of the report. Future prospects of SSE are clear and provide
long term interest to stakeholders. The report also identifies the barriers in the way but strong
foundations for growth are also elaborated in the report. Furthermore, the report provides the
proof of inclusiveness of shareholders with answers to their question from the CEO of the
company. It also significantly documents the performance and remuneration of its governingbody. Overall, information provided by the SSE ensures reliability and its value.
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References
Abraham, S., & Cox, P. (2007). Analysing the determinants of narrative risk information in UK
FTSE 100 annual reports. The British Accounting Review, 39(3), 227248.
doi:10.1016/j.bar.2007.06.002
Adelopo, I. (2011). Voluntary disclosure practices amongst listed companies in Nigeria.
Advances in Accounting, 27(2), 338345. doi:10.1016/j.adiac.2011.08.009
Haniffa, R., & Cooke, T. (2002). Culture, corporate governance and disclosure in Malaysian
corporations.Abacus, 38(3), 317349.
Healy, P., & Palepu, K. (2001). Information asymmetry, corporate disclosure, and the capital
markets: a review of the empirical disclosure literature.Journal of Accounting and
Economics, 31(1), 405440.
IIRC. (2013). The International < IR > Framework, 151. Retrieved from www.theiirc.org
KPMG. (2012).Integrated Reporting: Performance Insight Through Better Business Reporting.
Retrieved from kpmg.com/integratedreporting
Pricewaterhousecoopers. (2007).Narrative Reporting: Give yourself a head start. Retrievedfrom www.corporatereporting.com
Sarkar, P. (2011). Disclosures in Corporate Annual ReportsA Case Study of Some Selected
Public Limited Companies in India, (October), 572578.
SSE. (2011). Scottish and Southern Energy plc Annual Report 2011. Retrieved from
http://www.sse.com/Investors/Reports_And_Results/
SSE. (2012). SSE Corporate Profile 2012. Retrieved from
http://www.sse.com/AboutUs/SSEatAGlance/
SSE. (2013). Scottish and Sothern Energy. Retrieved from www.sse.com
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Yeoh, P. (2010). Narrative reporting: the UK experience.International Journal of Law and
Management, 52(3), 211231. doi:10.1108/17542431011044652.