An Annual report is a type of complete report on a company’s activities all across the preceding year. These reports are intended to give shareholders and other interested people information about the company’s activities and financial performance.
Defining annual reports
These records are records of accountability. They mainly present a company’s financial standing, product, image, identity, and performances; they give substantial insight into where the company may be headed in the future. Many companies use AP’s as marketing tools by listing accomplishments, achievements, thanking and recognizing employees and government.
It provides an opportunity to take a step back and look at the overall practical and financial health of the company’s business.
As it is known how effectively the company is doing.
We can find out whether the company is making more money than it is spending.
We can get an idea of management’s strategic plan for the coming year.
Purpose of annual reports
- For providing financial information
- Better accountability
- For decision making
The objective of annual reports
- For taking the best prospective decisions.
- For providing the correct information about the financial position, performance, and changes in the financial position of an entity.
- To present and disclose the information about the company.
- To lure new investors and to make adequate disclosures to the existing ones.
- For promoting the company’s image to the public.
- For highlighting the correct company’s achievements.
Statutory provisions at a glance
Companies to send the annual report and notice calling AGM to its members and others at least 21 clear days before the date of AGM.
An annual report must be submitted to government authorities like stock exchanges, ROC, RBI, and Sectoral regulators.
Mandatory disclosure requirements.
Annual reports to be uploaded on a stock exchange and companies websites.
MCA green initiatives- dispatch of the annual report through E-mail.
Unlisted companies are also required to comply.
The main reason for creating an annual report
- for demonstrating accomplishments.
- For recognizing important people like directors, employees, government employees, bankers, consultants, etc.
- For creating a historical progress record.
- To provide an account of the organization’s work for the past year.
- To fulfill a management best practice.
- One-year shelf life
- Sharing your story and successes.
- Table of contents
- List of board of directors
- Notice calling an annual general meeting
- Director’s report
- Corporate social responsibility
- Business responsibility report
- Auditors’ reports
- Balance sheet
- Statement of profit and loss
- Cash flow statements
- Notes forming part of financial statements
- Auditors report on consolidated financial statements
- Consolidated balance sheet
- Consolidated cash flow statements
- Consolidated statement of profit and loss
- Notes forming part of consolidated financial statements
- Subsidiary company details
Some more important concepts Which are used in Annual Reports
Directors and management
The main role of directors is to serve the interests of shareholders by overseeing the company’s strategy, policies, and performance. The directors are responsible for management decisions and operations across the company’s operations.
Annual general meeting
associate of the directors and all stakeholders of every incorporated company, need by law to be held each calendar year.
Report of the board of directors to members
The Board of directors issues a report annually giving details about the company’s operational and financial performance, policies performance, policies, programs, and prepare policy about the company to the members.
A management report is a statement made by management and it contains management’s views on the overall economy of the country. Operational performance of the company and future performance based on assumptions/ predictions.
An auditor’s report provides an opinion of the validity and reliability of a company’s financial statements. The main goal of an auditor report is ultimately to document reasonable assurance that a company’s financial statements are free from material error. In case of qualification or adverse remark in the auditor’s report, the board has to reply the same in its report.
it is prepared to know profit or loss and also the financial position of the business.
Shareholders fund and policy holder’s fund
Shareholders’ funds are usually the shares in the company, any share issue premium, retained profits, and possibly other reserves that have been accumulated.
Policyholders’ funds represent customer deposits pus interest credited at contract rates.
Preparing to create your annual report
Internal or external resources
Preparing throughout the year
- Internal or external resources
- Track achievements/awards received by the company.
- Keep various contents and reports up to date
- Compile photos of new projects/ achievements
- Save organization’s results reports
- Keep a running list of what to include in your annual report
- Maintain annual report pro/con feedback list ( your past reports and other reports you have seen).
Interactive annual reports
In India, Kotak got an interactive annual report made for them last year from an overseas agency. So far, it’s the sole company in India to have one it costly affair overseas.
Embedded videos are unique features of interactive reports, investors can be efficient in communication with.
The investor’s experience of surfing interactive annual reports is like the industrial visit of your company.
In conclusion, after a deep study on the topic on the importance of company annual reports, it covers the objective which I have set ( complete information of annual reports, their importance, purpose, objectives of annual reports, statutory provision, its content, and many more) I have observed that annual report serves as a communication tool and determines the main reality of an organization in the public mind, it depends on the quality of the information provided in the annual reports. The annual reports promote and allow the public to know about them. This will help the company their popularity and will be well-known. Here I have learned how the annual reports are beneficial for people, This all provides me the knowledge of annual reports and how it is helpful for others. It is a good medium of communicating with investors in a company also because it builds confidence also so it is very helpful in my suggestion.
You may refer to this video if you want the explanation in Hindi