Narrative Reporting FAQ’s – What is it?

“Narrative reporting” describes the non-financial information included in the published reports to build a meaningful picture of the company’s business, its market position, strategy, performance, and prospects.

Narrative content may be present in both external and internal reports. As an example, in the external Annual Report, narrative content would cover the strategic report, Directors’ report, Chairman’s statement, Directors’ remuneration report and corporate governance disclosures.

The Financial Reporting Council (FRC) has produced guidance on the strategic report and other aspects of narrative reporting. Narrative content, therefore, provides critical contextual information. The art of financial storytelling is full of advantages.

Narrative reporting is as much about how a business is run as about reporting. Companies that embrace narrative reporting have an opportunity to create a real competitive advantage. Narrative reporting allows companies to create a more commercially attractive and differentiated picture of the business, which can lead to better investor understanding and improved stakeholder relationships. Additionally, from an internal perspective, the narrative reporting process can also enhance Board effectiveness and improve governance.

1. What are the issues with the narrative reporting process?

For the vast majority of companies, the narrative reporting process is very manual. It will involve the use of Word and Excel to collect content. Excel would typically be used for numerical data and this will be keen to all copied into the Word document used to create the report. This is very risky and error-prone as well as being time-consuming.

2. I have a Business Intelligence (BI) system, can I prepare narrative reports here?

BI systems are often able to handle small amounts of text, but not design’s large amounts of narrative content and are typical in narrative reports. BI systems are very good at “slice and dice” and interactive dynamic reports but not narrative reporting.

3. I use an ERP/General Ledger system and this produces reports, so do I need a narrative reporting system?

These types of financial applications will indeed house reporting functionality included, but these reports will be purely numerical in nature. They will not allow you to add contextual narrative content to provide meaningful added-value commentary that allows internal or external report consumers to understand the strategic performance and direction of the company. Only a true narrative reporting solution will allow you to do this.

4. How can I implement being narrative reporting solution when I’m constantly busy?

Finance teams are generally operating with fewer people while meeting increasing demands from stakeholders. Regulatory reporting requirements are constantly growing and changing and puts increased pressure on teams to deliver. Although you may only have a week of respite from the month-end/reporting cycle, we can help you quickly implement a narrative reporting solution that will give you more time and allow you to concentrate on more valuable, interesting and added value activities. The insightsoftware CDM solution is based on Microsoft Office, the tools that most teams use every day for work. We can import and create your reports quickly, helping users to be up and running almost immediately.

5. I have to produce XBRL to meet a filing requirement – how do I do this?

If you are required to produce XBRL or iXBRL for filing with a regulatory authority, a proper narrative reporting tool will help you to automate and make your reporting processes more efficient while also allow you to create these outputs as well. Look for a solution that gives you integrated XBRL capabilities and solve two problems at the same time. Take a look at examples of how to present financial narrative for further inspiration.