Information
in Accounting at the University of
design and
manipulation:
financial graphs
in corporate
annual reports
Vivien Beattie and
Michael John Jones
We discuss the results of an
investigation into the graphic
reporting practices used by
240 leading UK companies in
their 1989 corporate annual
reports. Our main findings are
that 79 per cent of companies
used graphs and that 64 per
cent of all graphs were bar/
column graphs. Many of these
were poorly designed and con­
structed. There was evidence
of biasing in graphic choices,
with the use of graphic presen­
tation being contingent upon
'good' rather than 'bad' finan­
cial performance. Companies
were three times more likely to
include graphs in their annual
report which exaggerated,
rather than understated, fav­
ourable time series trends in
key performance variables.
There was also evidence of the
use of certain design and con­
struction techniques intended
to create a favourable visual
impression. There is a need
for more studies of graphic
practices in other domains,
and for guidelines to raise the
standards and fidelity of
financial graphs.
Information Design Journal 7:3 (1994), 211-226. DOI 10.1075/idj.7.3.03bea
ISSN 0142-5471 / E-ISSN 1569-979X © John Benjamins Publishing Company
Introduction Vivien Beattie is a Senior Lecturer
Stirling, and Michael John Jones is
a Lecturer in Accounting at Cardiff
Corporate information design is big business.
One particularly important corporate commu-
Business School. Both authors are
pleased to receive correspondence.
nications medium is the corporate annual
report. Recognition of the need for professional Authors' addresses
Vivien Beattie
and effective corporate design reflects a funda-
Department of Accountancy
mental sea-change in management's attitude to, and Finance
and appreciation of, the annual report's func- University of Stirling
Stirling FK9 4LA
tion. Until relatively recently the corporate Scotland
annual report was perceived as an annual regu- Michael John Jones
Cardiff Business School
latory chore, a primarily statutory document University of Wales, College of
whose sole purpose was to provide shareholders Cardiff
Aberconway Building
with stewardship information so that they could Colum Drive
assess managerial performance. T h e increasing Cardiff CF1 3EU
Wales
sophistication of the corporate communication
process has, however, encouraged management
to exploit the annual report's potential as a
major public relations and promotional oppor-
tunity (Hanson, 1989). Over the last 20 years
companies have, therefore, increasingly provid-
ed voluntary information and adopted more
imaginative and creative presentational tech-
niques. A particularly important and interesting
trend has been the growing use of graphic forms
of presentation. The majority of UK and USA
companies now include graphs of selected
financial variables in their annual reports. This
article focuses upon this particular practice.
Financial graphs offer companies an alterna-
tive presentational format to the traditional
alphanumeric table and continuous narrative
text formats. They have several key advantages.
Graphs, particularly those in colour, draw the
eye. This attention-attracting quality is re-
inforced by memorial potency. The brain's
memory for pictorial and graphical representa-
tion is, in general, superior to that for numbers
(Leivian, 1980). Graphs can therefore be
impressive communicators of financial, numeri- 1. Macdonald-Ross
(1977) provides an authorita-
cal information. 1 As Korol (1986) notes, graphs tive review of the use of graphs
possess 'the ability to better make comparisons to convey quantitative data in a
and identify trends, the ability to uncover previ- wide variety of contexts.
211
 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports
ously hidden facts; and, the avoidance of
lengthy analyses to determine the message' (pp.
148-9). A company's results are often sum-
marised using a few key financial indicators,
such as sales, profit, earnings and dividends.
Graphs, therefore, enable a concise financial
picture to be presented which can be readily
assimilated. In a survey, more than 75 per cent
of shareholders in the UK expressed a desire for
more graphs and charts in annual reports to
help explain financial performance {The
Accountant's Magazine, 1992). This was sup-
ported by a further recent survey of the annual
reports of UK and American companies which
concluded that graphs were valuable for the dis-
play of performance data and ratios (Peter
Prowse Associates 1993).
The increasing incidence of corporate finan-
cial graphics has been paralleled by largely inde-
pendent developments in the fields of statistical
graphics and computer graphics. Statistical
graphics researchers (such as Schmid and
Schmid, 1979; Schmid, 1983) have been partic-
ularly interested in further distilling, from exist-
ing practice, a set of design and construction
principles. Technological developments in
computer graphics have recently provided a cat-
alyst for experimental studies designed to test
psychophysical principles of graphical percep-
tion.
Five important premises underpin current
thinking about the graphical presentation of
quantitative material. These relate to: selectivi-
ty/biasing in the use of graphs, suitability of
graph type, measurement distortion, presenta-
tional enhancement, and context-dependency.
We now briefly describe each of these premises.
First, the initial decision about the use of
graphs must avoid biasing. It is a fundamental
principle in the communication of financial
information that information should be present-
ed in a neutral and unbiased manner. Biasing
would, for example, occur if commonly graphed
Information design journal 7/3 (1994) 211-226
212
variables were excluded solely on the grounds
that they would present an unflattering picture
of the company's financial performance.
Second, certain graphical forms are particu-
larly suited to specific tasks. T h e information
processing of graphs initially involves perceptu-
al, rather than highly cognitive, tasks. These
perceptual tasks include initial comparative
judgements of visual dimensions and the per-
ceptual accuracy of such judgements has been
shown to vary. For example, position along a
common axis (the visual dimension used in
bar/column graphs) is a more accurately per-
ceived dimension than angle/slope (the visual
dimension used in pie and line graphs)
(Cleveland and McGill, 1987). Most financial
graphs in annual reports portray time series
data which can be presented using column
graphs or line graphs. Column graphs are there-
fore the preferred presentational format for
such trend data, since this graph type utilises
position along a common axis. Furthermore,
financial graphs in annual reports are common-
ly used to present a quick overview of corporate
performance, rather than forming the basis of
an in-depth analysis. Simple information acqui-
sition tasks of this type rely on perceptual
impression rather than cognitive evaluation.
Consequently, the suitability of the graphical
format, which directly affects the impression
conveyed, is of critical importance.
Third, there is a consensus that the represen-
tation of numbers, as physically measured on
the graph's surface, should be directly propor-
tionate to the numerical values being represent-
ed (Tufte, 1983). In column graphs, therefore,
a doubling in the financial variable portrayed
should be represented by a doubling of the col-
umn's height. Violations of this fundamental
principle can be measured using Tufte's 'lie fac-
tor' (Tufte, 1983). Distortions can arise simply
because of inaccurate draughtsmanship or
because basic graph design principles have been
 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

transgressed. Possible transgressions include
the use of a non-zero axis, a broken axis, or a
non-arithmetic scale.
T h e fourth underlying premise is that a well-
designed graph has a number of key graphic
components (illustrated in figure 1) which must
be correctly displayed for effective communica-
tion to occur. For example, by convention, a
column graph has four structural components:
background, framework, graphic specifier and
labels. The background has no essential func-
tion and must be unobtrusive. The framework
for column graphs normally consists of two
intersecting perpendicular lines, which should
each be scaled. The specifier is the symbol
which represents the underlying numerical
values. For column graphs the specifiers
(columns) should be of uniform width, uni-
formly spaced, and not cross-hatched since this
can cause a distracting vibratory visual impres-
sion. Labelling should be clear, precise and
meaningful. The interaction of these graphic
components should result in an impression of
balance and harmony. Furthermore, the graph-
ic components should be arranged so that a
neutral and fair representation of the underlying
financial information is portrayed. In particular,
presentational enhancement designed to give a
more flattering view of the results than is war-
ranted by the underlying data should be
avoided.

Figure 1
Key graphic Title
components
Width of specifier
of a graph
XYZ plc Group Turnover
Interspace

40...

Specifier/
graphical
Scale division/ 30 element
tick mark

Turnover
(£m) 20

Gridline
Numeric label
10

o
1990 1991 1992 1993 1994
Axis/scale line
Year

Alphabetic label

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports
Finally, the context-dependency of graphs
has been emphasised. T h e effectiveness of
graphical presentation is contingent upon
decision task complexity (see., for example, De
Sanctis and Jarvenpaa, 1989) and upon user
characteristics (Garceau et al., 1988). For exam-
ple, it has been found that graphs are generally
superior to tables for simple information acqui-
sition tasks, with the degree of superiority
depending on the user's graphical literacy and
learning style preferences.
Surprisingly, given the ongoing debate con-
cerning the theoretical and practical aspects of
graphical design, we are unaware of any sub-
stantive, systematic investigations of empirical
practice in any discipline. 2 Consequently, there
is a lack of knowledge about graphical usage.
This article addresses this area of relative
neglect by discussing the results of a domain-
specific analysis of particular graphical practices
in financial reporting. T h e main aims of this
analysis were: first, to establish the extent and
nature of graph use by UK companies; and sec-
ond, to document and analyse cases where the
principles of representational neutrality had
been violated as regards selectivity, measure-
ment distortion, and presentational
enhancement.
We summarise the findings of a systematic
study of 240 annual reports, drawn by random
sampling from the largest (by market capitalisa-
tion) 500 listed UK companies. Using a check-
list, we collected for each company general
graphical information (for example, use and
non-use of graphs), and details about those
specific aspects of graph design and construc-
tion which are discussed above. This included
detailed information on the degree and poten-
tial causes of measurement distortion and on
presentational enhancement involving the
graph's four structural components.
2. There are, however, a large number of empirical
studies about map design and use.
Information design journal 7/3 (1994) 211-226
214
Our main findings were that 79 per cent of
leading UK companies used graphs and that
many of these were poorly designed and con-
structed. We found evidence of systematic
selectivity, measurement distortion and presen-
tational enhancement. These findings are dis-
cussed in the next section in more detail and in
table 1 we provide a summary. 3 We have, where
possible, supported our analysis by including
black-and-white reproductions of real-world
examples.
Findings
In the first part of this section we summarise
the frequency of graph usage, categorise the
types of graphs employed and the topics cov-
ered, and comment on both the use of graphic
designers and the prominence of the graphs.
T h e second part considers the important issue
of measurement distortion. Finally, in the third
part, we discuss our findings with regard to
aspects of the financial graph's design and con-
struction, covering the four main graphical
components and associated issues, such as
colour and illusory effects.
Nature and extent of graphical usage
Frequency of graph usage
T h e corporate annual reports of 189 out of the
240 companies (79 per cent) contained at least
one graph (of either a financial or non-financial
3. Readers wishing a more in-depth coverage of our
findings are referred to Beattie and Jones, 1992 a, b. The
first of these articles is a Research Report, published by the
Chartered Association of Certified Accountants, which
reviews the accounting graphics literature, gives a basic
description of graphs and graphical understanding based
on the statistical graphics literature, and includes 21 colour
examples of corporate financial graphs. The second article
presents a detailed statistical analysis of the relationship
between the incidence of graph use, measurement distor-
tion, and measures of corporate performance.
 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

variable). More particularly, 65 per cent of all

companies graphed one of four financial vari-
ables (turnover, profit before tax, earnings per
share (EPS) and dividends per share ( D P S ) )
which are of key importance in assessing a com-
pany's performance. The average number of
graphs used by graph-using companies was 7.5.
Interestingly, the decision to use graphs of the
four key financial graphs is contingent upon
good financial performance. In other words,
companies with good financial performance, as
measured by an increase in E P S , were more like-
Figure 2
ly to include graphs of at least one key variable
Scottish
than those companies where EPS had declined. Metropolitan
For example, of the 183 companies where EPS Property plc
increased over the current reporting year, 73 per 1989: earn­
cent included graphs while of the remaining ings per share
graph. This
companies, where EPS declined, only 41 per
fan-shaped
cent did so. Using a chi-square test this was sta- pictorial graph
tistically significant at the 1 per cent level. And, has no conven­
except in the case of turnover, significant asso- Earnings Per Share tional axes and
ciations were discovered between an increase in the specifiers
an individual key financial variable and the like- are of inconsis­
tent width. The
lihood of that specific variable being graphed. Graphic designers
remote key
T h e use of professional external designers was impedes fast
Types of graph very much the norm: 69 per cent of the annual information
In all there were 1,426 graphs, of which 31 per reports which contained graphs credited an processing. In
external design company.4 However, there was the colour orig­
cent showed key financial variables. T h e most
no evidence of oligopolistic concentration - 130 inal, the speci­
common graph type overall was the column/bar fiers darkened
graph (64 per cent). T h e column graph is par- companies used 93 different external designers. progressively
ticularly useful for displaying time series data, Addison Design and Michael Peters Literature from light blue
since it portrays time sequentially, from left to were the only two designers to be acknowledged to dark purple.
right. It was used for 84 per cent of the key by more than 5 per cent of the 130 companies.
financial variables, which were typically shown Only five companies acknowledged in-house
as five year time series (72 per cent). A small designs. A chi-square test supported the hypo-
minority of companies used graphical types thesis (at the 5 per cent level) that those compa-
considered to be totally unsuitable for time nies employing graphic designers would be
trends. For example, Scottish Metropolitan more likely to use graphs. In an interesting
Property (see figure 2) has no conventional testament to the standards of British graphic
axes, the columns form a fan-shape, emerge
4. We have no way of telling whether those companies
from an uncertain origin, and also progressively which did not give explicit credits used in-house designers
widen. Consequently, problems are posed when or left the design in the hands of the annual reports'
inter-column comparisons are attempted. printers.

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

designers, we found no evidence to suggest that Figure 3

the use of graphic designers resulted in a higher
incidence of material measurement distortions.
Prominence and location of graphs
Companies typically presented key financial
graphs prominently as a group at the front of
the annual report. We termed prominent pre-
sentation of this nature 'highlighting'. One
company, Tomkins plc, presented its graphs on
the front cover (figure 3). Two-fifths of the key
financial graphs were included in a financial
highlights section, with on average 0.78 pages
being dedicated to key financial graphs.
Measurement distortion
As previously discussed, one of the fundamental
premises underpinning graphical presentation is
that a graph's physical measures should propor-
tionately represent the underlying numerical
values. Transgressions of this nature are termed
measurement distortion. We measured all the
key financial graphs using Tufte's 'lie index'
(Tufte, 1983; Beattie and Jones, 1992b), class-
ing distortions of over 5 per cent as material
measurement distortion. We chose 5 per cent
for two reasons: first, Tufte (1983) judged dis-
tortions in excess of 5 per cent to be 'substan-
tial' (p.57); and, second, Pany and Wheeler's
(1989) review of the auditing literature deter-
mined 5 per cent to be an important threshold.
Of the 465 key financial variables, 142 graphs
(30 per cent) showed material measurement
distortion. Even more interestingly, in 129
cases, where both the final year change and the
trend were upwards, the upward trend was
exaggerated in 98 cases and understated in only
31 cases. In other words, we found that mea-
surement distortion was three times more likely
to give a more, rather than a less, favourable
portrayal of a company's performance. This
result was statistically very significant, using the
binomial test.
Tomkins plc,
1989: divi­
dends per
share graph.
The up-pointing
arrows serve
to draw the eye
upwards, as do
the rather dis­
tracting back­
ground vertical
stripes. The
lack of both
gridlines and
numbers
attached to
the specifiers
make it diffi­
cult to read
this graph
accurately.
The major cause (82 per cent) of materially
discrepant graphs was non-specific errors in
draughtsmanship. In the case of Dowty Group
(figure 4) the measurement discrepancies for
D P S and EPS are +140 per cent and + 22 per
cent respectively. In both cases, there is a conse-
quent exaggeration in the trend - financial per-
formance is presented more favourably than is
warranted by the data.
A significant minority of material discrepan-
cies had specific causes: for example, a non-zero
axis (17 graphs), a non-arithmetic scale (6
graphs), a broken vertical axis (2 graphs) and
truncation of a negative scale (1 graph). Figure
5, Glynwed plc, illustrates a non-zero axis. Such
graphical practices have been much criticised
for their violation of the proportionality premise
(see, for example, Schmid, 1983; Tufte, 1983).
In cases where graphs are casually scanned by
readers, rather than thoroughly processed, the
risks of the transmission of inaccurate informa-
tion are obviously increased. In the example
which we have chosen to illustrate these risks

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

DIVIDENDS AGAIN

I NCREASE

S U BSTANTI ALLY,

BY 20 PER CENT

Figure 5
Glynwed plc, 1989: dividend per
share graph. This graph illus­
trates the use of a non-zero axis,
resulting in measurement dis­
crepancy. The wavy lines in the
background distract from the
specifiers, while the absence of
either gridlines or numbers
Figure 4 attached to the specifiers makes
Dowty Group plc, 1989: dividends per share, earnings accurate graph reading relatively
per share, profit before tax, and turnover graphs. The difficult.
judicious bunching of these four graphs and careful scale
selection results in an almost continuous rising trend
across the page. The lack of a scaled y-axis helps to dis­
guise the scale selection. The dividends per share and
earnings per share graphs show graph measurement dis­
crepancies o f + 140% and +22% respectively. In the origi­
nal colour graphs the final year's specifier was a darker
colour than the previous years' specifiers.

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

(see figure 6, T.I.P. Europe plc), the cause of the

discrepancy was not immediately obvious. The
context in which T.I.P. Europe's EPS graph was
presented held a major pitfall for the unwary
reader. T h e other three graphs presented by this
company on the same page shared a common
format, but with zero axes. They also contained
four, rather than three, specifiers. We suggest
that the unsophisticated graph user may easily
misread this graph.

Construction and design

T h e findings discussed in this section are
summarised in tables 1 and 2.

Background
Graphical theory dictates that the background
should be non-distracting and generally unob-
trusive (e.g. Kosslyn, 1989).5 In 22 cases, how-
ever, we considered backgrounds to be obtrus- Table 1, however, demonstrates that the Figure 6
ive. Backgrounds, such as supermarket shelves majority of companies provided neither a scaled T.I.P. Europe
plc, 1989
and a cafe scene, submerged the specifiers and time (69 per cent) nor a scaled financial variable
Earnings per
often drew attention to themselves rather than axis (73 per cent). Neither were gridlines preva- share graph.
to the graphs. In figure 5, we show Glynwed lent which, in the absence of scaled axes, would The 'three-
plc's D P S graph. T h e wavy lines in the back- have helped graphical perception. In addition, dimensional'
ground draw attention away from the specifiers. five companies ordered their time series uncon- nature of the
specifier caus­
ventionally.
es some ambi­
Framework T.I.P. Europe (figure 6) illustrates both a guity: it is hard
Column graphs, like other Cartesian rectilinear scaled vertical axis and gridlines. However, to tell whether
coordinate graphs, should be drawn with clearly these helpful graphical aids are offset by the we are looking
specified, scaled axes and with time series data dysfunctional non-zero axis. Figure 4 (Dowty at the front of
a wall or the
ordered from left to right. Gridlines may also plc) illustrates the potential problems created
inside of a box.
facilitate effective visual interpretation. Korol by the absence of an effective framework. All The non-zero
(1986), in particular, has emphasised the four graphs are set within a common frame- axis causes a
importance of scaling: 'errors in perception work, which disguises the different scales used graphical dis­
drop almost to zero if adequate scales are pro- to draw the D P S and EPS graphs (in pence) and crepancy of
+720 percent.
vided' (p. 374). the profit before tax and turnover graphs (in
Finally, in the
£m). A potentially misleading impression of a colour original,
5. We acknowledge that in certain cases the graph continuous rising trend is created by judicious the later years
background can be effectively used to gain attention. In 22
ordering of the four graphs, since a false conti- gradually dark­
cases, however, our experience of viewing the graphs sug-
nuity is established. ened in colour.
gested that the background design was dysfunctional,
attracting attention to itself and impeding the underlying
message.

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

Table 1 Number of key Number

Summary of Proportionality of physical graph financial displaying
graphic report­ measure and numerical values variables feature percentage
ing practices in
the 240 corpo­ Material measurement distortion 465 142 30
rate annual
reports.sur­ Number of
veyed here. companies Number
to which this displaying
Graph type issue applies feature percentage

Unsuitable graph type (bar or pictorial) 156 16 10

Structural components
Background
Obtrusive background 156 22 14
Framework
No scaled time axis 154 106 69
No scaled financial variable axis 154 113 73
No gridlines 154 121 79
Unconventional ordering of time series
(right to left or bottom to top) 156 5 3
Specifiers
No space between graphical elements 148 19 13
Inconsistent spaces between graphical elements 129 9 7
Three dimensional specifier 156 29 19
Labels
No numeric label on financial variable axis 154 105 68
No number attached to individual specifier 156 41 26
Numerically labelled, scaled financial variable axis,
but neither attached numbers, nor gridlines 154 16 10
Financial variable axis located at left hand side 154 9 6
Non-existent or unconventional location of numeric
label on time axis 154 12 8
Unconventional location of number attached
to individual specifier 112 26 23

Typeface
Number attached to specifier not horizontal 115 17 15
Typeface changes within series of numbers
attached to specifier 115 20 17
Numeric year labels not horizontal 156 2 1

Colour
Colour progressively darkened with time 129 8 6
Colour of last year's individual specifier was darker
than all other years which were of uniform colour 129 16 12
Colour of last year's individual specifier was a
different hue to all other years 129 18 14

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports
Specifiers
T h e specifier represents the underlying num-
bers. Many original and innovative specifiers
were discovered, including those which reflect-
ed the 'image' of the corporate report. For
example, Capital Radio (figure 7) adopted
aerials as a specifier, while Fisons (principally
a scientific, research-based company) used
pipettes to convey a scientific image. Devenish
(J. A.) and Marston, Thompson and Evershed,
who are both brewers, use lager bottles (figure
8) and barrels respectively to transmit their cor-
porate image. In the case of Devenish (J. A.) not
only the height, but the width, of the bottles
changes. This gives the impression of a conse-
quent increase in volume creating ambiguity as
to which visual dimension is associated with
the numerical values.
Specifiers and spaces between specifiers
(interspaces) should be of equal width and
evenly spaced (Jarett, 1983). This principle was
not universally practised. Figure 9, Lovell (Y.J.)
Holdings plc, for example, portrays a series of
steadily widening columns and steadily narrow-
ing interspaces. Attention is thereby drawn to
the columns which represent more recent years.
Twenty-nine companies employed three-
dimensional specifiers (see, for example, T.I.P.
Europe in figure 6). T h e three-dimensional
nature of the specifiers may cause ambiguity
(see Wainer, 1984, p. 145). For example, when
combined with inadequate scaling, or the lack
of a common axis for all years, accurate
perception may be inhibited.
Labelling
A clear title and effective labelling obviously
facilitates graphical perception. All the graphs
we encountered, except for two, had titles. In
most cases firms considered that the use of such
titles made alphabetical labelling for the finan-
cial variable axis superfluous (for example
Tomkins plc (figure 3). Nor was an alphabetic
Information design journal 7/3 (1994) 211-226
220
label commonly used for the time axis. On
occasion, this general sparsity of labelling led
to confusion.
The numeric labelling on the time and finan-
cial variable axes is conventionally located out-
side the graph's inner framework, close to the
axes. Furthermore, in the case of the financial
variable axis, the values at each scale point
should be indicated (Schmid, 1979). These
principles were not universally followed. On the
time axis, two companies failed to provide year
details, while in 10 cases the numerical labels
were not positioned conventionally. For exam-
ple, in figure 2, Scottish Metropolitan Property
plc, a remote key was used. Remote keys are
considered inappropriate for graphical presen-
tation (Lewandowsky and Spence, 1989).
On the financial variable axis 105 (68 per
cent) out of 154 companies using graphs with
Cartesian axes gave no numerical labels on the
axes. T h e more common practice adopted by
the majority of companies (115) was to attach
numbers directly to the top of the specifiers.
There is a division of opinion in the statistical
graphics literature on such a practice. Without
gridlines it can make inter-specifier compar-
isons difficult. Of those companies attaching
numbers, three recorded only the first and last
years, while 26 companies positioned them
unconventionally (for example, in a horizontal
row above all the columns). Figure 2 (Scottish
Metropolitan Property plc) and figure 4 (Dowty
plc) provide examples of specific numbers
attached to specifiers. Figure 3 (Tomkins plc)
illustrates the use of numeric labelling of the
financial variable axis. These labels are located,
unconventially, on the right hand side of the
graph. It is also noteworthy that Tomkins'
alphabetic financial variable label serves as a
title and that the lack of gridlines and numbers
on the specifiers makes inter-year comparative
judgements difficult.
 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

Alignment of type in labels TURNOVER Figure 7

An important element of labelling is the way in
which the type is used. Type should be present-
ed horizontally to facilitate reading and should
be internally consistent in style and size to avoid
confusion. Of the 115 companies that directly
attached numbers to specifiers 13 aligned type
vertically, and 4 placed type at an angle. The
angled type was used in a particularly unusual
way by Capital Radio, figure 7. The numbers on
top of the specifiers slope from top left to bot-
tom right, whereas the numeric labels on the
time axis sloped from bottom left to top right.
Another interesting and frequently employed
method of presentational enhancement was the
differential emphasis placed upon the final
year's number. One of the 20 companies adopt-
ing this practice was Lovell (Y. J.) Holdings plc
(figure 9). Here bold type is used to stress the
importance of the final, and most impressive,
year's performance.
£000 Capital Radio pic, 1989: turnover
graph (£000). This graph uses an
original design - aerials - as a spec­
ifier. The numerical labelling for the
final year in the time series, 1989,
is bolder than that used for the earli­
er years. There is extensive use of
type aligned at an angle.
Figure 8 (below)
Devenish (J.A.) plc, 1989: ordinary
share dividend graph. In this graph
both the height and width of the
lager bottle specifiers change, cre­
ating the impression of a greater
increase in the dividend than is war­
ranted. Lack of axes compound the
difficulties for the graph reader.

Colour
A particularly interesting feature of many
graphs was the association of darker colours
with the later years of a time series graph. In the
case of figure 2, Scottish Metropolitan Property Ordinary share dividend
plc, there is, for example, a progressive darken- £000's
ing of colour from light blue in 1985 to dark
purple in 1989. In this case, and 7 others, the
numerical quantities portrayed increased con-
tinuously over time, while the intensity of the
colour progressively darkened. There is, thus, a
prima facie ordered ordinal relationship
between colour intensity and numerical quanti-
ty. There appears to be little consensus in the
literature about such a relationship. Tufte
(1983, p.154) suggests that intensity and quanti-
ty are directly proportionate. Kosslyn (1989,
p.204), on the other hand, believes that if
colour is used, then lighter colours should cor-
respond to higher values.
In addition to this progressive use of colour,

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

we commonly found the colour of the final Turnover

year's specifier to be either darker than the uni- £ millions
formly coloured preceding years (12 per cent)
or of a completely different colour to the single
colour of earlier years (14 per cent). This pre-
sentational enhancement of the final year coin-
cides with Kosslyn's (1989) observation that
abrupt changes draw the eye. The eye is thus
drawn to the last year of a time series. In figure
9, Lovell (Y.J.) Holdings plc's graph illustrates
this point: 1989, the final year's turnover graph,
is yellow; by contrast 1985-88 are blue. The
change in colour naturally draws the eye to the
1989 column.

Special and illusory effects

We identified 75 examples of various special
effects (see table 2). Of these we judged that 44
were forms of presentational enhancement
while the remainder had variable effects on our
perception. Four types of presentational
enhancement can be distinguished: sloping pre-
sentation, emphasis on top of specifiers, non-
consecutive time series and embedded graphs.
Generally, all the examples of presentational
enhancement depend upon two fundamental
characteristics of graphical perception. First,
graphs are read from left to right, in the same
way that we read print. Second, the top of the
graphs, which forms the trend line, is the focal
aspect of a graph. T h e consequence of this rea-
soning is that, where presentational enhance-
ment occurs, the graphical techniques focus on
the top right.
Sloping presentation, therefore, typically
slopes from left to right. We identified five dif-
ferent ways in which angled presentation
enhanced a company's graph. First, the
specifiers within a graph sloped back in a step-
wise manner. The consequence of this may well
be that, as in Laura Ashley Holdings plc (figure
10), the later years may appear more impressive
than the facts warrant. Second, the specifiers
85 86 87 88 89 85 86 87 88
Figure 9
Lovell (Y.J.) Holdings plc, 1989: turnover graph.
This graph has specifiers which gradually widen through­
out the time series and interspaces which gradually nar­
row. The combination of bold typeface used for the final
year's labels, different colour (in original graph) used for
the final year's specifier, and sloping specifiers draws the
eye upwards to the right, enhancing the perception of a ris­
ing trend. The position of the baseline with respect the
platform is unclear.
themselves sloped from left to right. Lovell
(Y.J.) (figure 9) utilises this technique. Third,
the labelling sloped (see discussion above and
figure 6, Capital Radio). Fourth, in two cases
the individual graphs themselves contained no
sloping elements; however, the series of graphs
were arranged across the page, in stepwise fash-
ion, from bottom left to top right. Finally,
Dowty's graphs (figure 4) were presented in a
carefully arranged, ordered sequence: D P S ,
EPS, profit before taxation and turnover. The
almost subliminal impression is that we have a

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports

Table 2 Feature Number of

Special and companies
illusory effects displaying
feature
used in the
240 reports Presentational enhancement
surveyed.
Use of slope
stepwise specifiers 6
specifiers 5
labels 4
stepwise graphs 2
combined series of graphs 1

Top of specifier emphasised

multishading 9
background shading 4
marking 4
upward-pointing arrows 3
top faces of 3D columns 2

Two year nonconsecutive time series 2

Embedded graphs 2

total 44

Variable effects

Crosshatching 11

Shadows 9

Individual specifiers 7
Figure 10
Obscured baseline 4 Laura Ashley Holdings plc, 1989: sales, operating profit,
and profit before taxation graphs. These graphs slope
total 31 towards the top right, creating the possibility that later
years are perceived to be progressively larger than they
actually are. The baselines of the sales and operating
graphs are obscured by the profit before taxation graph,
making it difficult for readers to make accurate judge­
ments.

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 Vivien Beattie & MichaelJohnJones ■ Information design and manipulation: financial graphs in corporate annual reports

continuous rising trend of 20 years. In fact, we
have four distinct five-year time series.
We identified five broad design aspects which
emphasised the top of individual specifiers.
First, multishading occurred, where each col-
u m n was shaded from bottom to top - with the
top being shaded darkest. Second, differential
shading in the background adjacent to the top
right of the graph drew attention to this area of
the graph. Third, the tops of the columns were
emphasised, for example, by drawing them in
black. Fourth, three companies (including
Tomkins plc, figure 3) used upward pointing
arrows. This is an interesting psychological
ploy, since subtle connotations of directionality
are imputed to the time series. Finally, the top
face of three-dimensional columns was empha-
sised, the effect of which is once again to draw
one's attention to the top of the graph.
We identified two further forms of presenta-
tional enhancement. First, one company's
graphs showed specifiers for only 1980 and
1989. The immediate, almost unconscious,
inference is that this represents two consecutive
years. By omitting the years 1981-88, the initial
impression is of a substantial and impressive
leap in turnover and profit. Second, we identi-
fied the use of embedding, where graphs of a
different type and nature are 'embedded'
among other very different graphs. For exam-
ple, one company included a graph entitled
'1989 Turnover by Section (continuing busi-
nesses)' together with profit before tax, EPS and
D P S graphs. However, this is a non-time series,
sectoral turnover graph, which is arranged and
presented, superficially at least, as if it were a
time series of the fourth key financial variable.
We isolated four categories of special effects
which did not necessarily enhance presentation.
First, cross-hatching was used in 11 cases.
Cross-hatching is where the interior of the spec-
ifier consists of parallel or criss-crossed lines.
Cross-hatching may cause a disturbing optical,
vibratory effect called Moire vibration and is
therefore best avoided in colour graphs
(Schmid, 1983). Second, nine specifiers had
shadows attached to them. These shadows had
no obvious effect but, in certain types of projec-
tion, enhanced the perception of column length
(Schmid, 1983). Third, there were seven
instances where individual specifiers were dis-
tinguished in some (previously undiscussed)
way. For example, in one case they formed part
of an underlying picture. This proved distract-
ing. Finally, in four cases the baseline of the
graph was obscured. Thus, as in the cases of
Lovell (Y.J.) Holdings plc (figure 9) and Laura
Ashley Holdings plc (figure 10), uncertainty
reigned as to where the baseline began. Clear
judgement of the length of individual specifiers
was, therefore, impeded.
Conclusion
This study discusses the graph design issues
which arise from a domain-specific empirical
investigation into the particular graphical
reporting practices of 240 leading UK firms in
their 1989 corporate annual reports. The main
findings are that 79 per cent of companies used
graphs, 64 per cent of all graphs were bar/col-
umn graphs and the most popular variables
graphed were turnover, profit before taxation,
earnings per share and dividends per share.
90 per cent of all key financial graphs were
in colour.
Many of the graphs were poorly designed and
constructed. 10 per cent of time-series graphs
were drawn using a bar or pictorial graph
instead of the more appropriate column graph.
In addition, many graphs suffered from obtru-
sive backgrounds, lack of a clear framework,
non-uniform specifiers, poor labelling, inappro-
priate typeface and cross-hatching.

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 Vivien Beattie & Michael John Jones ■ Information design and manipulation: financial graphs in corporate annual reports
There was also evidence of systematic selec-
tivity, measurement distortion and presenta-
tional enhancement. The decision to choose a
graphical presentation was contingent upon
financial performance. In short, the annual
reports of companies were more likely to
include graphs when corporate financial per-
formance was favourable rather than unfavour-
able. Turning to measurement distortion, we
found that companies were three times more
likely to include graphs in their annual report
which exaggerated, rather than understated, a
rising trend. Finally, we commonly found
instances where firms appeared to use colour,
angled presentation and emphasis on the top of
specifiers to enhance their graphs.
These findings have implications both for the
development of knowledge about graphs and
for the practical role of graphs in the corporate
financial reporting process. Systematic,
domain-specific, empirical studies, which have
been relatively neglected to date, uniquely offer
the opportunity to study the practical applica-
tion of graphical theory. They provoke new
insights into issues such as the role of colour in
graphical displays as well as complementing
theoretical studies. There is thus a need for
more such substantive studies of actual prac-
tice. In addition, there is also a need for comple-
mentary studies which explore the way in which
people read, interpret and make sense of graphs
in specific contexts.
T h e main practical implication of this study is
that it demonstrates the need for financial
reporting graphical guidelines to be developed.
At present, the form and content of financial
statements contained in the annual reports of
the UK and other developed countries, such as
the USA, is regulated and audited. Graphs, on
the other hand, being voluntary, are subject to
no external validation. Given our findings con-
cerning systematic selectivity, measurement
distortion and presentation enhancement, we
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would argue that the development of graphical
guidelines is long overdue. We believe that
comprehensive guidelines would improve the
representational faithfulness of graphs.
Acknowledgements
We thank the 240 companies who sent us their annual
reports, and particularly the 9 who gave us permission to
reproduce the graphs illustrated in this article. The
financial support of the Chartered Association of Certi-
fied Accountants is gratefully acknowledged. On the
individual level, we are extremely appreciative of the help
and encouragement of the editor of IDJ, Paul Stiff, and
for the valuable comments of the referees.
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