Etisalat: Information for Shareholders Analysis



The underlying purpose of this report is to discuss and evaluate different elements pertaining to the availability, presentation, disclosure, and verification of vital corporate and financial information by companies and their auditors. The outcome of the report is in the form of recommendations that are set forth as a way by which companies can improve the extent and quality of the information made public for various stakeholders.


Nearly every company, whether private or public prepares annual reports in some form for both internal and external use. However, for public limited companies, it is required by statute to prepare financial statements on a periodic basis and publish their periodic annual reports which include these financial statements and other vital information, considered essential by stakeholders of the business. Over the last few decades, the extent of information provided by the companies in their annual reports has increased significantly. The content is not just limited to the presentation of financial statements and their accompanying notes, but now companies are increasingly providing descriptive information regarding their past performances and expectations of the future. Furthermore, recently emphasis has been placed upon corporate governance and increased responsibility for the management to make disclosures which could help shareholders in making their own assessment of the risks associated with their investments in businesses and, therefore, undertake their investment decisions more cautiously and informatively.

Research Methodology

This report could be clearly set out in five distinctive sections. For Section 2 of this report, the Annual Report 2009 of Emirates Telecommunication Company (Etisalat) has been selected for critical review of classes of information provided by the company for its stakeholders. The basis of this review is the reporting framework laid out by International Accounting Standards Board (IASB) is also considered assessing the information provided by the company for fundamental characteristics (Deloitte Global Services Limited 2010) and also the latest developments in the corporate world related to reporting requirements.

In addition to this, Section 3 and Section 4 are descriptive sections of the report and the discussion in these parts is drawn from the secondary sources which are available to the researcher from various academic databases and online web.

Examination of Classes of Information

The annual report of Emirates Telecommunication Company is reviewed for the year ending 2009 has been reviewed on the basis identified in the research methodology. This information has been summarized and provided with this report as Appendix I. Since, the research has set out the basis for evaluation as the IFRS conceptual framework for reporting, therefore, the examination of information is split into the following headings as per the framework.

Objective of Reporting

Etisilat is operating in different countries and has established relationships with other businesses globally. In light of the IFRS conceptual framework, it is suggested that the information provided in the company’s annual report serves requirements of all stakeholders including investors, creditors, debtors, and agencies etc. The annual report contains not only financial information but also contains information regarding management’s responsibility and corporate governance. It also provides information regarding changes in the economic position of the company over the last year. Although the annual report does not contain all general information that could assist shareholders in making their economic decisions but the information provided by the company could be considered as highly extensive. This analysis could be extended by examining different classes of information provided in the report.

Introductory Part

This part only provides figures for certain financial ratios geared at assessing the company’s performance over the last year, and it does not provide any information about the company. However, this information is provided in the notes to financial statement.

Chairman’s Statement, CEO Statement, Board of Directors and Executives, and Group Highlights

The annual report contains these classes of information. Chairman’s Statement provides major highlights of the year including growth in the business, customer bases, improvement in cash flows, and capital investments in the company’s expansion plans. Group Highlights provide a summary of company’s performance on the basis of the different business and geographical segments in which the company is operating. One area of concern that could be identified is that the details provided for directors and executives of the company are not comprehensive. For example, it does not provide details of directors’ remuneration and other benefits to executives. There isn’t any indication where any of directors is independent or non executive members are also part of various committees. CEO Statement highlights major achievements of the company in the year 2009.

Operating and Financial Review

Management review initiates with information regarding the financial position of the company and its ability to generate cash flows for its investment plans. One weakness that could be suggested is that this section does not provide five year financial summary, which makes the trend analysis impossible. The company has been able to maintain high credit rating. The company has paid a dividend of AED0.60 in 2009 that is higher than expectations. The review of the overall economic conditions and factors affecting the company’s business are thoroughly discussed and supporting financials are provided to demonstrate the company’s strong position, despite such difficulties. Detailed overviews of the UAE market and other markets such as Africa, Asia, and Middle East are provided along with company’s investment plans to make its position in these markets stronger. In addition, to this each business segment is also elaborated for its core activities. There is no information regarding changes in shareholders’ funds, capital structure, and the liquidity position. There is no going concern statement related to the future of the business.

Directors’ and Auditors Report

This class of information is not available in the annual report which could be considered one of the limitations of the annual report published by the company.

The company’s financial statements and related disclosures are audited by independent audit firms – PriceWaterhouseCoopers and Deloitte & Touche. The consistency of Chairman’s report with the financial statements is also assessed. However, there is no opinion on the corporate governance and risk management practices of the company. This could be considered as lacking from the reporting despite of increased emphasis on these issues.

Corporate governance and Risk Management

Although the annual report provides details of various committees and oversight bodies within the company, however, there is not information regarding their member and schedule of meetings held during the year. It lacks information regarding any issues that may have been raised during the year.

Moreover, the company does identify risks associated with its investments and use of financial instruments, however, it does not indicate the value at risk which could be important for the shareholders to know and understand. No information is provided relating to any litigation issues which the company may be facing.

Remuneration support

This is perhaps one of the weakest sections of reporting by Etisilat. Notes to financial statements only provide totals of short term benefits provided to the directors. However, there is no information of other benefits paid to them and salaries and bonuses of top executives.

Shareholders information

There is no information on the major shareholders of the company. Notice of annual general meeting is provided in the report along with issues considered in these meetings. Details of executives are also provided, however there is no organizational chart. Financial year is only mentioned in the management’s report and as part of financial information. Proxy forms are only available from Etisilat’s office (Etisilat 2009).

Financial Information

The company prepares and published Income Statement, Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flows on a consolidated basis. Notes to financial statements are also provided that particularly include details of accounting policies, use of estimates, and segment reporting. In addition to these, financials included in all financial statements are supported by detailed provisions of information by the company. The financial statements are signed and authorized by the members of BoD.

Other information

The annual report is graphically enriched where pictures, graphs, and tables are provided for easy understanding of the users. Moreover, the annual report has a title page and table of contents page which also provides the address of the company’s corporate office and regional offices. However, no addresses are provided for company’s offices or subsidiaries in other countries.

Reflection on Issues

Inclusion of issues related to social responsibility of organizations in their annual reports will certainly attract the interest of external stakeholders. Corporate social responsibility is a managerial function for image building of the organization. Under this function, managers take actions that protect the welfare of society as a whole. An external stakeholder is defined as a party who directly or indirectly affected by the actions of an organization. They included consumers, concerned citizens and governments. According to Werther and Chandler, external stakeholders can have an impact on the profit of the organization as they stated, “The benefit of transparency and honesty in all aspects of an organization’s operations is that it allows external observes to evaluate the organization, its managers and policies more effectively. The reporting of a corporation’s activities in a misleading way, however, can have a negative impact on the perception of that organization among external stakeholders” (Wether and Chandler 2010).

External stakeholders, who comes into contact with an organization have right to demand a process of accountability in it. There are a number of things which if included in annual reports will attract the interest of external stakeholders, including environment impact of the business and analysis of the product or service the business provides. For becoming socially responsible, an organization should have a clear, rational explanation of social purpose, a system of setting priorities on the basis of their social implications, and a planned, integrated approach to financial and social action.

An annual report is considered as the face of an organization. It is important for organizations to pay attention to their social responsibilities for their image building in the society. Managers should aware of the external environments, including cultural trends in society and how external stakeholders respond to organization’s actions. The external environment of an organization is consists of both direct action elements which affect and are affected by the actions of the organization.

Moral principles in an organization focus on people that organize themselves in an attempt to perform the ethical responsibilities of their business lives. Theoretically, the concept of social responsibility has two different views. Number one is classical view and the second is socioeconomic view. The two contrasting views have different theories about social responsibility. According to classical view, management’s sole responsibility in running an organization is to multiply its profits. However, the socioeconomic view says that an organization should be concerned about the welfare of the society. The concept of socioeconomic view supports the idea that issues related to social responsibility should be the part of annul reports of organizations (Mullerat and Brennan 2005).

Managers are responsible to take care of benefits of all stockholders of organizations. When managers work hard to make as much money as possible for those stakeholders, who have financial interest with the organization, they should also take care of the interests of those stakeholders who do not have any financial interest in the organization. In fact, interests of internal and external stakeholders of an organization are interrelated. They will lose, if the costs of social responsibility have a bad impact on profits and dividends. Here importance of external stakeholders is clear. For example, if an organization does not care about the interest of its external stakeholders, they will in return give the organization a bad image in society. A bad image will inwardly have its impact on the profit of the organization. “The essential ingredient is for the CEO to be able to deliver a consistent and easy to understand message of corporate purpose that should be aspirational in tone but not over-commit the company to specific social goals” (Mullerat and Brennan 2005).

In conclusion, it can be said that including issues related to social responsibility in annul reports in fact in the benefit of organizations. The first priority of an organization is not its profit, but its survival. Its mean managers should not only look towards profits, but also work for the image building of organizations. And for image building, organizations need to fulfill their social responsibilities.

Benefits and problems in Audit Timing

The theoretical framework applies to financial statements which are the primary means of communicating information about the likely cash flows of the business, its resources, claims on those resources, and changes in them to its shareholders. There are a number of benefits and at the same some problems in requiring annual reports to be audited at the same time as the financial statements. “At the heart of any annual report is the financial report or review, which consists of the financial statements accompanied by notes to explain various items on the statements” (Porter and Norton 2009).

The financial statements and their supported working documents and systems are audited by both internal and external auditors. This process is a long process and requires many weeks and staff to carry out the task and compile findings. In addition to the financial statements, the annual reports contain detailed non-financial information. This information serves the purpose of annual reports that is to provide a clear and effective presentation of the management’s account. The non-financial information provided in the annual reports is actually aimed at supporting the figures published by the company in its annual reports.

The possibility of carrying out audit of both financial statements and annual reports has certain benefits. This includes removal of the time lag between the information that is presented and verified in the financial statements and the non-financial part of the annual report. Reconciliation between both parts of the annual report would be easier and auditors would have a better view of the information provided by the company. This also has some costs benefits as the non-information will be prepared along with the financial statements and auditors can perform their task together. The CEOs discussion of the businesses and factors affecting the business needs to be ensured that it is relevant to the financial information. If both are audited at the same time then surely any differences can be pointed out swiftly. Therefore, the most important benefit is to achieve consistency and relevance between different classes of information presented in the annual report.

However, there is a weakness which needs to be discussed. Although non-financial part of the annual report supports the financial statements but they often contain certain information that may come to attention after financial statements are prepared and verified and, therefore, such information may not be possible to be included in the report once it has been audited.


Combining findings from the examination of classes of information presented in the annual report of Etisalat and discussions on different informational issues and timing of audit, this report draws important conclusions regarding the need of information by external stakeholders of companies and the growing importance of the information content provided by businesses.

There is some major flaw in the annual report of Etisalat. This is related to the information on director’s remuneration and benefits. This issue has been continuously debated on worldwide forums and regulators are increasingly requiring this information to be provided by companies for external users of the report. Moreover, the details of corporate governance and risk management seem weak where there is no indication of the value at risk by such risks. No information is provided regarding any major concerns to the business or litigation that it may be facing. Overall, the content of the annual report is weak from corporate governance perspective and the company must ensure to provide additional information regarding their business and the environment in which it operates for shareholders to have more confidence in the company.

For many decades, the annual reports were simply seen as the way for companies to present and publish their financial statements. However, with time and trust of shareholders being tarnished, regulators are forced to introduce new reporting standards and requirements for businesses to follow and ensure that they make sufficient disclosures regarding issues important to the shareholders. Corporate social responsibility is one area that the companies are increasingly providing in their annual reports to supplement their financial statements with non-financial information. However, there could be other information in annual reports such as financial forecasts for coming periods, detailed review of corporate governance, business risks, financial ratios, details of litigation, and capital market trends and stock performances.

Another area of investigation has been regarding the timing of audit and preparation of financial statements. The discussion reveals its potential benefits and drawbacks. Real time reporting and verification would be an ideal situation, however, this is impossible without hiring a larger staff for performing these tasks at the same time and thus, high costs are likely to occur.

Overall, the report makes the following recommendations:

  1. Companies need to adopt reporting ways which are responsive to the needs of shareholders in order to be better decision makers.
  2. Since, management is responsible for shareholder’s funds and their profitability, therefore, greater responsibility should be in place and detailed information should be provided regarding the money that is distributed to the directors before distributing to shareholders.
  3. Accounting policies and practices, which are currently under discussion between IASB and FASB and other global accounting bodies, are set to converge; however, there are still issues where countries keep their own standards in light of the differences in the regulatory framework. However, in a similar manner the content of the annual report can be made on a uniform basis where companies would be required to provide minimum amount of information to their users in a particular format.


Deloitte Global Services Limited, 2010. Summaries of International Financial Reporting Standards – Conceptual Framework for Financial Reporting 2010. Web.

Etisilat, 2009. Etisalat Annual Report 2009. Financial. Dubai, UAE: Emirates Telecommunication Company.

Mullerat, R. and Brennan, D., 2005. Corporate social responsibility: the corporate governance of the 21st century. Netherlands: Alphen aan den Rijn.

Porter, Gary A. and Norton, Curtis L., 2009. Financial Accounting: The Impact on Decision Makers. Stamford, Connecticut: Cengage Learning.

Werther, William B. and Chandler, Jr., David, 2010. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment, California: SAGE Publications.


Class of Information – Emirates Telecommunication Company

Yes / No
Chairman’s Statement Yes
Board of Directors and Executive Committee Yes
Group Highlights Yes
Chief Executive Officer’s Statement Yes
Management Review Yes
UAE Highlights Yes
On the ground – a market view Yes
Network Yes
Etisalat Services Holding Yes
Human Capital Yes
Corporate Social Responsibility Yes
Corporate Governance Yes
Financial Statements Yes
Independent Auditors’ Report to the Shareholders Yes
Consolidated Income Statement Yes
Consolidated Statement of Comprehensive Income Yes
Consolidated Statement of Financial Position Yes
Consolidated Statement of Changes in Equity Yes
Consolidated Statement of Cash Flows Yes
Notes to the Consolidated Yes
Financial Statements Yes
Notice of Meeting Yes
Director’s Remuneration No
Director’s Report No
History No
Glossary No
Investor Relations No
Organisation Chart No
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