Annual Report is a comprehensive report prepared by an organization to showcase their yearly performance to shareholders or stake holders.
Such annual reports are published every year by the management with a year wise comparison to past performance of the company. Annual reports can be used by general public, banks, creditors, debtors, employees and investors for their reference.
If a company is registered in stock exchange then as per security exchange board of India’s guidelines, they have to compulsorily prepare two kinds of annual reports which in turn will be submitted to stock exchange and other regulatory bodies. These annual reports are;
- Quarterly Reports
- Annual Reports
Quarterly reports are prepared and released by the company for each quarter which contains a balance sheet, Statement of Profit and Loss Account and Statement of Cash Flow.
The company must state whether it has been audited by a local auditor or not. For USA, its the Certified Public Accountants who does audit on behalf of company’s shareholders.
In India it’s the Indian chartered accountant being a member of ICAI conduct audits for those companies that are registered in India. In other countries they have their own local auditors who does periodic audit as per their legal requirements.
Annual report is a comprehensive statement prepared by companies for the stakeholders to update them on the past performances and future prospects of company.
Annual Report of a company contains;
- an outlook of the industry and company
- financial statements of the current year with comparison to past years
- director’s letter to shareholders
- auditor’s report and various other statements based on the statutory compliance of the country where the company is registered.
Use of Annual Report
Followings are a list of agencies which are in use of annual reports;
- Government Agencies: These agencies are required to know whether the company has complied with all the regulations. They also use information as a base to understand the macroeconomic position of the industry.
- Shareholders: Used to look into the future potentials of the company by reading past history and future outlook in the annual report
- Customers: Future credentials of the company and the product development of the company
- Employees: Career Growth and participation on the profitability as bonus.
- Bankers: Used for credit assessment and to know whether the profitability is sufficient to meet their obligations so that they can take lending decisions in future.
- Executives and Managers: They prepare annual report to know how well the company has performed financially and what are the problem areas so that in future same things will not be repeated.
- Research Analyst: They use annual report to prepare their analytical research for clients based on which investment decisions are carried out by the investors.
Note: In a group company’s annual report in addition to above mentioned things the companies also provide followings;
- Consolidated statements of income
- Consolidated Balance Sheets
- Consolidated Statement of Cash Flows
- Consolidated Statement of Share-Owners’ Equity
- Subsidiary Companies Financial Statements