What is an Annual Report?
- An Annual Report or company report is much more than a summary publication of the company year.
- An Annual Report is an aptitude for the future, a summary of achievements and challenges, an act of transparency towards shareholders and investors.
What is an Annual Report like?
Regardless of the format which presents, company reports tend to follow a standard structure:
- Letter from the Chairman
- Significant data
- Board of directors
- Activity report
- Annual accounts
- Audit report
- Most companies use an independent certified public auditor to verify information in financial reports.
- The audit report includes comments on the report’s fairness and how well the accounting adheres to generally accepted accounting principles.
What is an Annual Report for?
- Current and potential investors and others interested in a company’s finances use the annual report to assess the organization’s financial health.
- Investors, shareholders, banks, and company executives use the company’s annual report for decision-making.
What does Annual Report contain?
1. Financial summary section
- Traditionally placed inside the annual report cover, the financial aspects can also be on the first pages of the information.
- This section reports five to 10 financial numbers for the year, typically highlighting earnings, income, dividends, and increases per share.
- Businesses can also include amounts of debt to show how much we spend on increasing operations.
2. Letter to shareholders
- The letter to shareholders suits the chairman of the board of directors or the president of the company.
- It highlights the positive developments in the business and analyzes the fiscal achievements.
- This long section of the report is also known as the Management Discussion and Analysis, hence the abbreviation MD&A.
- Also, management highlights and discusses both favorable and unfavorable trends.
- And also, discussions are opinions based on official financial statement numbers.
4. Financial statements and notes
- The financial statements and section notes compare the company’s income statements.
- However, it has cash flow statements, and capital stock statements from the last three years.
- And also, the section also compares the balance of the previous two years.
- The comparative statements include notes from the administrators and the financial auditors.
5. Internal control report
- The Sarbanes-Oxley Act of 2002 requires publicly traded companies.
- Also, it is to maintain executive control over official financial reporting.
- The law holds executives directly responsible for financial misinformation.
- This section provides certification that company executives authenticated the information contained in the report.
6. Auditor’s report
- Firstly, most companies use an independent certified public accountant to verify information on financial reports.
- Secondly, the auditor’s report section of the annual report identifies the CPA audit and the internal accountants and managers responsible for the information in the account.
- Lastly, the CPA auditor includes comments on the fairness of the word and how well the accounting adheres to generally accepted accounting principles.
Parts of Annual Report
1. Introductory materials
- Firstly, an annual report cover and introductory pages set the tone for the report that follows.
- Professional designers who specialize in annual reports are often used to help translate the company’s message into an appropriate coverage aspect.
- The company’s mission and objectives are constantly reiterated in these introductory pages to remind readers of the company’s grand goals.
- A letter addressed to the readers (shareholders in the case of a public company and stakeholders in the other instances) summarizes the report that follows.
- However, we may not follow it by a “highlights” page to layout the points for readers.
2. Discussion and analysis
- Presenting audited financial data to shareholders and other readers.
- Also, it is the primary goal of most annual reports.
- However, this section begins with a discussion and analysis of the numbers to come.
- Also, the summary page verbally explains the figures presented in the news.
- Often, with justifications explaining why certain items did or did not occur.
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