Narrative reporting [chapter]

Katarzyna Czajkowska, Marek Masztalerz, Ana Rep
2021 Accounting challenges for sustainability and innovations  
For years financial and management accounting reports were based primarily on "hard" numbers. Extensive written descriptions and explanations were not common in practice. However, in recent decades there has been a significant shift towards "softer" and more narrative communication in accounting. The purpose of the chapter is to identify and describe the determinants of the develop-ment of accounting narratives in practice, and to explain why narratives are gaining importance in accounting
more » ... nication. The chapter presents the links between accounting and language, the development of accounting narratives and the factors determining the use of narratives.Narratives give economic units the opportunity to explain the situation and the achieved finan-cial results. The use of narratives helps to better meet the information needs of stakeholders. There are still many challenges ahead of narrative financial reporting, such as determining the minimum content of reports, ensuring comparability of reports or the issue of external control of narrative financial reporting.An insufficient application of professional accounting materiality judgment is considered as one of the main causes of disclosing too much irrelevant information and not enough relevant informa-tion. Preparers of narrative reports should be aware that without applying materiality principle the information disclosed in the reports are not considered transparent and stakeholders lose confidence in such companies.
doi:10.18559/978-83-8211-055-5/03 fatcat:6bkutyftjrelndqhvcq3jhng2m