The relevance in Annual reports -Studying the use of annual reports in the credit and investment decision

Abstract: Background: The adoption of the mandatory use of IFRS as accounting principles for all listed companies in the European Union in 2005 have triggered a debate about the usefulness of the financial statements prepared in accordance with these regulations. Voices have been raised, both in favor of these regulations and against them. Purpose: The purpose of this bachelor’s thesis is to describe the use of the annual report in the analytical processes of investors and lenders. Furthermore, an evaluation is made whether annual reports made in accordance with IFRS meet the IASB framework quantitative characteristic of relevance for investors and lenders. Method: The empirical findings in this thesis were obtained through qualitative interviews. Interviews were conducted with representatives for both lenders and investors. Conclusion: For lenders, the annual report lacks the timeliness needed to be of relevance in the decision making process. The annual report, however, is valuable for the credit analyst in that it provides reliable audited information with which they can confirm the information previously obtained. The investment analyst has the same problem with the timeliness issue as the creditor. Furthermore, the investment analysts feel that the annual report provides information lacking in quality due to the fair value valuation method. The conclusion can be drawn that from the investor’s perspective, the annual report lacks relevance in the decision making process.