Components of the Annual Report
Concept of Annual Report
➦ An annual report is a comprehensive report on a company’s activities throughout the preceding year.
➦ Annual reports are intended to give shareholders and other interested people information about the company’s activities and financial performance.
➦ Components of the annual report consists of various things. The annual report is a financial document published by most private and public companies to summarize the major transactions of the year.
➦ The report usually begins with a letter from the Chairman of the Board and/or the Chief Executive Officer.
➦ It also includes the balance sheet, income statement and the cash flow statement as well as a discussion of company affairs and notes to the financial statements.
➦ Public corporations are required to provide shareholders with an annual report describing their operations and financial situation each year.
➦ An annual report’s front page usually consists of graphics, photos, and a narrative summarizing the company’s activities over the past year and making predictions for the future.
➦ The report includes detailed financial and operational information at the back. The purpose of the required annual report is to provide the public with information about a company’s operating and financial activities over the past year.
➦ Shareholders and other stakeholders typically use the report to evaluate the firm’s financial performance and to make investment decisions.
➦ A company’s annual report will tell you how it achieved this growth, what its strategy was, and whether this performance will last.
➦ Annual reports provide qualitative information that is crucial when making investment decisions.
➦ If the annual report is still not filed after a certain period of time, the jurisdiction will revoke your company’s good standing or put it into forfeiture.
➦ In addition to the past due annual report, most states require a certificate of reinstatement and additional fees.
➦ Several companies can prepare sections of your annual report. Alternatively, you may have an attorney prepare the report and file it with the state on your behalf.
➦ You can purchase accounting software to assist with the financial aspects of your report if you choose to do some of the work yourself.
➦ The joint stock companies publicly owned and listed on a stock exchange are required to prepare and publish an annual report for its shareholders.
➦ In Nepal, the privately owned companies are also required by the Companies Act, 2053 BS to prepare an annual report and submit it to the Office of the Registrar of Companies.
Major Components of Annual Report
1. Financial Statements
➦ The financial statements consist of four statements prepared by the companies as a form of communication with its shareholders and other user groups.
➦ They include income statement, the balance sheet, statement of cash flows, and statement of changes in stockholder’s equity.
➦ The information provided in the financial statements is the responsibility of the management and subject to verification as part of the external audit.
2. Chairperson’s Report
➦ This report is an address by the Chairperson of the company’s Board of Directors to its shareholders at the Annual General Meeting (AGM).
➦ It comprises the summary of the results of financial affairs, composition of the BOD and discussion about the external environment, especially the economic and financial situation of the country and place of operation of the business.
➦ The chairperson might take this opportunity to thank and acknowledge the support and co-operation of the company’s BOD, shareholders and staff and employees.
3. Management Discussion and Analysis
➦ The management team discusses the financial statements and provides vital explanations for the amounts reported in the financial statements. Some companies report this section as financial review.
➦ The section is directed at not only simplifying the information contained in the financial statement and any back-up information requiring clarification but also providing crucial information about the company’s business plan or strategy.
4. Notes to Financial Statements
➦ The notes to financial statements provide crucial information regarding the accounting policies and procedures adopted, the basis of taxation, the employee benefit schemes.
➦ It also provide the information regarding the commitments and contingencies, the inventories, the account receivables, account payables and other details of items clubbed together to make the financial statements brief.
5. Financial Summary
➦ Another regular feature in any annual report is the summary of financial information, especially of the revenue, net income, and total assets. Many reports call it financial highlights.
➦ This section is primarily a pictorial representation using colourful pie charts, bar diagrams, or graphical curves.
6. Report of the Independent Auditor
➦ Before the annual report is presented to the company’s shareholders at the AGM and submitted to the concerned government office, the books of accounts and the financial statements of the company are subject to an external audit from an independent auditor.
➦ After such an audit, the auditor issues a report addressing to the company’s shareholders.(According to accounting standard).
References
- Vanderkolk, L. (2022, September 22). 5 elements to include in your annual report. Scooter Media. https://www.scootermediaco.com/2022/09/annual-report-elements/
-
Hayes, A. (2024, February 25). Annual report explained: how to read and write them. Investopedia. https://www.investopedia.com/terms/a/annualreport.asp
Related Posts:
- Difference between Periodic and perpetual Inventory System
- Difference between Capital and Revenue Expenditure
- Characteristics of Sole Proprietership
MBA,BBA.
I am Smirti Bam, an enthusiastic edu blogger with a passion for sharing insights into the dynamic world of business and management through this website.
I hold a MBA degree from Presidential Business School, Kathmandu, and a BBA degree with a specialization in Finance from Apex College,
- Marginal Costing Quiz – Multiple Choice Questions (MCQs) | Cost Accounting - November 29, 2024
- As part of the consent process, the federal regulations require researchers to: - September 8, 2024
- Concept and Nature of Intellectual Property Rights – Explained in Detail | Business Law - January 30, 2024