Companies should place more emphasis on future potential instead of concentrating on the past in their annual reports.

Proposals from the financial reporting committee of the Institute of Chartered Accountants call for more information from businesses about future direction.

Ken Lever, chairman of the steering group looking at reporting on shareholder value, said: "Annual reports ought to include more details about future potential as well as past performance."

He said a company's ability to create value in the long term relied on competitive advantage and the strategic direction taken to maintain it. Businesses needed to understand their sources of competitive advantage and communicate this internally and externally.

Worthing-based accountant Mark Spofforth, president of the South Eastern Society of Chartered Accountants, agreed, saying he believed investors would welcome more information from companies about strategic direction.

He said: "Few businesses take the opportunity to give this information in their operating and financial reviews. It would be a step towards improving the quality of dialogue between management and investors about the future.

Neil Chisman, group finance director of Thorn and a member of the financial reporting committee, said that in his experience as a finance director in the hotel industry the two factors that most affected value were the rate of return on new investment and the rate of innovation in improving the efficiency of operations.

He said: "In my opinion, UK plc underperforms because many companies do not have an informed debate with investors about their strategic direction."

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