Financial reports provide a large part of the information required by individual decision makers (e.g.,bank loan officers, portfolio managers, managers of divisions or epartments,etc.). These reports include narrative disclosures which should be tested for their comprehensibility. Annual reports aim to communicate with interested parties and provide reliable and understandable information on past, present and future company activities. This type of report has become one of the basic means of communication between companies and interest groups. This applies primarily to joint stock companies that provide comprehensive business information through an annual report so that interested parties can have an insight into business results and can make business decisions to achieve their goals and interests. In order for all interested users to make appropriate decisions, it is essential that they understand published information. The usefulness of narrative disclosures will depend partly on the complexity of the display (their readability) and also on the capability of users in discerning the appropriate meaning (their understanding) . If the message intended by the preparers of accounting disclosures is to be successfully conveyed, the receiver must be able both to read and understand it. Understanding of the financial statements refers to the reader's ability to understand the information contained in the narratives, so that the sent message is clear, understandable, accurate and unambiguous. The method used to measure text understandibillity of the finantial narratives is a cloze procedure. This paper focuses on the manner in which the narrative message is presented in accounting and difficulties and differences in its interpretation for users of varying degrees of accounting sophistication. The correlation of understandibility of each group was demonstrated in terms of profitability, industry sectors, total amount of stock trade in 2016. and stock price volatility. The survey showed a greater understanding of the management reporting for telecommunications sector companies in both groups of respondents; and low degree of understandibiliy of accounting narratives in Transportation and storage sector for the group of respondents with higher level of accounting sophistication. Also, the study has shown statistically significant positive correlation between the annual share turnover of the company and understandibility for the group of respondents with higher level of accounting sophistication.