An annual report serves as a comprehensive document that presents key insights into your company’s financial standing and advancements over the preceding year. This report can take the form of a digital PDF or a printed version, with larger corporations commonly making it accessible on their official websites.
Annual reports summarizes the financial position and all events in a company’s previous financial year. It is a mandatory requirement for all companies; public companies as well as private companies.
Preparing and submitting annual reports is mandatory compliance as per the Companies Act 2013 and other prevailing Acts, Rules, and regulations like SEBI, Income Tax Act, 1961, etc.
What does an annual report contain?
Annual reports are to be prepared based on set guidelines and format as per the Companies Act 2013.
Chairman’s letter
The Chairman’s letter or the CEO’s letter is the start of an annual report. It is a short message from the chairman with highlights of the past year as well as future pathway for the company.
Company philosophy
The second section in an annual report highlights the company philosophy. The company’s vision and mission is described. The vision will tell the stakeholders about future milestones and how the company plan to achieve them,
Information about business operations
The third section in an annual report is related to basic information about the company. The performance of the company in the past year is mentioned in detail.
Financial statements
The financial statements are the main section and backbone of the annual reports. This is the most crucial part where stakeholders can get facts and number of the performance of the company.
The annual financial report includes:
- Balance sheet: Shows the financial position of the company at given date.
- Profit and loss statement: Reflects the financial performance for the year.
- Cash flow statement: Details the cash movements throughout the year.
- Changes in equity statement: Illustrates changes in equity.
- Consolidated financial statements: Required by accounting standards, may include parent entity financial statements under certain conditions.
- Notes to financial statements: Discloses necessary information.
Auditors report
The Auditor’s Report is an integral part of the company’s annual reports. The auditors of the company draft their reports based on the financial transactions during the previous year. It contains information about the responsibilities of the auditors, the nature and purpose of the audit, and finally, their opinion based on their findings. This report is mandatory as per various laws like the Companies Act, 2013, Income Tax Act, 1961, SEBI.
Management comments
This is the last section in the annual report. It highlights the strengths and weaknesses of the company along with a better understanding of the industry and company’s position and future projects.