Making financial disclosures more readable
Firms should incorporate the use of plain English when drafting such documents so that the reader can understand.
FINANCIAL disclosure documents are notoriously difficult to make sense of, even for seasoned investors. Warren Buffett, the guru of investing, spoke for many of us when he said: "For more than forty years, I've studied the documents that public companies file. Too often, I've been unable to decipher just what is being said or, worse yet, had to conclude that nothing was being said."
While financial concepts can themselves be complex, they are frequently made more difficult to understand by the manner in which they are presented to readers. Financial disclosure documents are often wordy and repetitive, and can contain unnecessary details. It is not uncommon for material information that is relevant to readers to be concealed by the use of jargon, or for companies to use convoluted explanations or descriptions in their disclosures.
To make financial disclosures more easily readable and understandable, companies should incorporate the use of plain English when drafting such documents. A plain English document uses words economically and at a level that the reader can understand. Its tone should also be welcoming and direct, and its design visually appealing. At its best, a document written in plain English should be understood by a reader the first time he or she reads it.
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