An annual report is primarily undertaken for the protection of shareholders and includes financial highlights, chairman's statement and director reports.
There are several aims associated with a company's annual report which include the following: to provide protection to shareholders, information to mangers, customers and suppliers as well as help for prospective shareholders thinking of investing in the company. The company report is used to satisfy legal reporting requirements and is also used by the chairman and directors as a means of advertising.
According to Langdon & Bonham (2006) annual reports typically consist of the following areas:
* Mission statement
* Financial highlights
* Chairman's statement
* Chief executive and directors' reports
* Operations review
* Auditors report
Company Annual Reports - Mission Statement
A mission statement (for anyone who has not seen 'Jerry Maguire!') is basically a strategy statement which explains the intent or vision of the company and is usually shown on either the front cover or clearly laid out on the first page of the report. Ideally, mission statements should be short and simple to comprehend. This statement must then be identified as being relevant to the content of the report in order for it to be valid.
Company Annual Reports - Financial Highlights
Following the mission statement, the next part of the annual report is used to show a financial comparison between the company's performance during previous year and the year before. It is important to always bear in mind when reading the financial highlights that as interesting as it may be it is highly likely that any figures will have been very carefully chosen in order to make the company look as profitable as investment as possible.
Company Annual Reports - Chairman's Statement
The chairman's statement is essentially associated with laying out the company's main intentions and will usually include information on critical aspects relating to issues from the past and those in the future. Key sections identified in this statement will include areas such as dividends, structural information, personnel information as well as focusing on main trading aspect from the previous year.
In terms of dividends, the chairman described a strategy on dividend in the future which will have been put together by the board.
Company Annual Reports - Chief Executive/Directors' Reports
This area is legally required to provide certain information such as issues relating to profit, dividend figures, research and development. Key aspects associated with this section of the report include details on remuneration, shares, interest, donations (charitable/political), auditors and creditor payment policies. Most director reports will also offer additional information, for example regarding employment of disabled personnel, environmental and corporate issues.
Company Annual Reports - Operations Review
The operations review is key to understanding the company's strategy and will involve employees at all different levels from those on the shop floor right up to directors. This is a means of attempting to ensure that what is happening in all areas of the company is tying in with intentions of the directors. Obviously, this is no easy task as it effectively requires open communication throughout the entire company .
Company Annual Reports - Auditors' Report
Finally, the annual report will also contain the auditors' report which basically is used to identify that the auditors have undertaken necessary work and how this was completed. A key aspect of this report is what the auditors' opinion are regarding the prepared accounts and whether there are any doubts expressed in relation to specific accounting methods.
As highlighted above, the annual report is useful for shareholders, customers, managers and suppliers as well as being a legal requirement. Key aspects of the annual report include financial highlights, operations review and both the chairman and directors' reports.
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