A Letter to IASB: CBA and NAB Annual Report Communication Analysis

This report analyzes the communication effectiveness of the 2017 annual reports of the Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB). The analysis, presented in the form of a letter to the IASB, highlights several key issues. The report criticizes NAB for unnecessary duplication of information, particularly in the directors' report and remuneration committee report, and the lack of graphical presentations. Similarly, the CBA report is criticized for including information from previous years, non-compliance with the prescribed income statement format, and the lack of comparability due to format inconsistencies. The report suggests that both banks improve their reports through clearer and simpler presentations, including graphical elements, and by adhering to the correct formats as prescribed by relevant AASBs to enhance clarity, comparability, and overall effectiveness for investors. The author supports their arguments with references from the annual reports and IFRS documents.

Solution-1
Letter
To,
The IASB
Subject: Discussion on the lack of effective communication in the annual reports of CBA and NAB
Dear Sir,
While reading the 2017 annual reports of CBA and NAB, I came across certain things which makes the
ineffective communication of the above stated annual reports, this leads to more time taken by me in
analyzing the reports. These lacking principles of effective communication are as below ("Snapshot:
Disclosure Initiative—Principles of Disclosure", 2018):
In the annual report of NAB (National Australian Bank) ("Annual Financial Report 2017", 2018)
(a) Free from unnecessary duplication – the information presented should be free from duplicated
information, so that the investors can keep an eye on the important information without wasting
much of their time. However, in the given annual report there are lots of information which are
duplicated or unnecessary, for example, the report of directors which is 54 pages long and does
not contains much required information, this report can be ignored and the management should
provide only the relevant information without providing the whole report. Similarly, the
management has provided the full remuneration committee report without giving its synopsis or
summary. These reports can be ignored and only meaningful summary can be provided.
(b) Organized to highlight important matters – The information presented should be well presented
and organized so that the information can be easily read. However, the stated annual reports lacks
on this area. The information presented does not contain proper headers specifically in financial
reports and the reports are also not in good sequence. Notes are not in proper sequence and are
not properly numbered.
(c) Clear and simple – The presented information can be made simple and more understandable with
the help of pie charts and graphs, as these pie charts and graphs are more easily understandable
and has a long lasting impact on the users. However, in the annual report of NAB, this graphical
presentation is missing.
In the annual report of CBA (Commonwealth Bank of Australia) ("Annual Report 2017", 2018)
(a) Free from unnecessary duplication – Similar to above, the annual report of CBA also contains
some unnecessary information. For example, the financial statements contains the details of year
ended on 30 June 2015 as well. Whereas the companies are required to present the information
for one comparative year only i.e. the CBA is required to present the information for year ended
30 June 2017 and 30 June 2016 only.
(b) In an appropriate format - The information presented should be in an appropriate and common
format prescribed. However, the income statement presented is not in the format as prescribed by
Australian Accounting Standard Board. As per the prescribed format, the income statements

should first contain the details of all revenues then all expenses and then should present the profit.
Whereas, the company has not presented this in the above stated format. Similarly, the balance
sheet is also not in the appropriate format and does not contains details as regard to current and
non-current bifurcation.
(c) Comparable – The information presented should be comparable with the information of
companies in the same industry, so that the investors can compare the financial information of
various companies and can take their investment decisions. Since, the presented information is
not in the appropriate and prescribed format, so it makes the information of CBA incomparable
with the information of other companies.
(d) Clear and simple – The information is not simple and clear by its presentation as the notes are not
in the proper format and sequence. The noted should start from the details of income statements
and should end with the derivative instruments and other additional information. Whereas this is
not the case in the presented annual reports.
Suggestions
My two biggest suggestions in these annual reports are as below:
(a) Clear and simple presentation – The information should be clearly presented with proper
sequencing and added graphical presentations. More and more graphical presentations should be
used as it gives a clear picture of the details to be presented.
(b) Appropriate format – The format used for preparation and presentation of financial information
should be correct and should adhere with the requirements of relevant AASBs. As the AASBs
prescribe the common format and these common formats help the investors to compare the
information for various companies with one another and helps in taking the decisions as to which
company they need to make the investment.
References
Snapshot: Disclosure Initiative—Principles of Disclosure. (2018). Retrieved from
https://www.ifrs.org/-/media/project/disclosure-initative/disclosure-initiative-principles-of-
disclosure/discussion-paper/education-materials/principles-of-disclosure-snapshot-2017.pdf?
la=en&hash=46F7C67CABF7B5CE758F9FF2BB8AFECC3C41338C
Annual Financial Report 2017. (2018). Retrieved from
https://www.nab.com.au/content/dam/nabrwd/About-Us/shareholder-centre/documents/2017-
annual-financial-report.pdf
Annual Report 2017. (2018). Retrieved from
http://www.republicast.com/CBA01/2017/CBA01/7dc72817b6424c698aa1cf78342b7bf4/2017
%20Annual%20Report.pdf