Annual Report Definition, Importance, Components & Overview

Posted in Finance, Accounting and Economics Terms, Total Reads: 1873

Definition: Annual Report

An annual report is a report of a company’s performance throughout the year. The annual report is not only restricted to the financial performance and includes all aspects such as operations etc. which would be of concern to the stakeholders. Annual reports summarize the financial, operational and business performances for a year, and are published annually.

Importance of Annual Report

The annual report is published and sent to all the stakeholders for them to reflect on the firm’s current year’s performance and also to form a perspective on its future performance. An annual report comprehensively summarizes the overall annual performance of a company, and the future plans of the company with short term and long term goals. Annual reports give a message from the company director, various analysis', note on corporate governance, profit & loss financial statements, auditor reports etc. Annual reports helps investors to understand whether they should continue to be associated with a company or that they should withdraw in case there is a slump in business.

Components of Annual Report

A typical annual report generally has the following sections

1. Chairman/MD’s Report - Operational & Financial Review (OFR)

2. Management Discussion & Analysis

3. Statement on Corporate Governance

4. Auditor’s report

5. Financial Statements & Income statements

6. Notes to Financial Statements

7. Accounting Policies

8. Note on Operations

Hence, this concludes the definition of Annual Report along with its overview.

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