Summary Annual Reports: Background and Implications for Financial Reporting and Auditing

Recent developments have made summary annual reports available as a reporting option for public firms. A summary annual report contains condensed financial statements omitting or condensing many of the traditional footnotes required by the generally accepted accounting principles (GAAP). The differences between summary annual reports and GAAP-based financial reports and the potential conflict between summary reports and the Financial Accounting Standards Board's (FASB) conceptual framework are illustrated by comparing McKesson Corp.'s 2 types of reports. Summary reports are found to be lacking in completeness, comparability, and understandability. This conclusion raises questions about the summary annual report and the conceptual framework and about what constitutes fair reporting. The conclusion also has implications for auditors' responsibilities and auditing standards with respect to summary reports.