Important Contents of annual report:

Chairman’s speech- Chairman’s speech highlights corporate activities, strategies, researches,

labour relations, main achievements, focuses on future goals, growth.

Director’s report- directors are to present their report with respect to the state of company’s affairs,
the amount if any which they purposes to earn, to any reserve and dividend, materials changes and
commitments if any, conservation of energy ; technology absorption and foreign exchange earnings.

Auditor’s report- An auditor is appointed by the shareholders of a company to audit accounts and as
such, auditor addresses the report to the shareholders of the company on the accounts audited by him. It
is the duty of the board of directors to attach the auditor’s report to the balance sheet so as to provide a
copy of auditor’s report to every member of company.

Balance sheet- also known as position statement provides a bird’s eye view on company’s financial
position as well as condition. This statement indicates whatever company has and whatever company
owes.

Profit and loss account- also known as Income Statement indicates net profits earned by company
during current financial year. It also indicates profits available for distribution and appropriation after
meeting tax liabilities.

Schedule- These schedules are attached with financial statements for giving detailed information
regarding items concerned. It may be found containing in some balance sheet or in part of profit and loss
account.

Cashflows- It has made obligatory on the part of companies for reporting its cash flows as per the
requirements of the standard.

Acoounts of subsidiary- Information’s about subsidiaries duly signed by directors and company
secretary on behalf of the board of directors along with detailed information regarding directors of different
subsidiaries along with secretary auditors and bankers.

Corporate Governance- focuses on a company’s structure and processes to ensure transparent

and responsible corporate behaviour. Effective corporate Governance not only reduces the agency costs
incurred due to division of ownership but it helps in saving of time and resources of investors.

Accounting policies- represent choices among different accounting methods that can be used while
preparation of financial statements.

Components of annual report:

Introduction Section- Providing brief descriptions of the business activities for the year. Such an
overview helps the business connect with users of the financial report. In the introductory section includes
a review of operating and financial results, summaries of historical trends and nonfinancial information.
Bigger businesses might include a chairman’s statement and director’s report in the introductory section.

Income Statement- a critical component of an annual financial report. It presents detailed breakdown
of the profits or losses generated by a business during a financial year.

Balance Sheet- portrays the ability of a business to honor debt obligations. It essentially summarizes
the assets and liabilities of a business enterprise. The current assets section that comprises items like
inventory, accounts receivable and cash. Current liabilities are short-term business obligations such as
trade payables and bank overdrafts.

Statement of cash flows- summarizes the inward and outward movement of cash in a business.
This section captures the inflows and outflows of money generated from operations, investments and
financing activities

Notes to financial statements- elaborate on the facts and figures in the financial statements to
enhance clarity. This section clarifies accounting policies and uncertainties that may cloud a business's
assets and liabilities.
Purposes of Annual Report:

To promote the company- part of this is the company’s bragging about what it has accomplished
during the preceding year and where it expects to go in the coming year. The purpose of this marketing
and public relations material is to keep existing shareholders pumped up about the wisdom of their
investment and to attract new shareholders to the fold.

To display its financial performance and goals- more interest to serious investors are the
sections addressing the corporation’s financial performance in the past year. Additionally, the company
addresses how it intends to improve financial performance going forward.

Example:

 increasing revenue by expanding into global markets.

 Becoming regarded as a premier employer.

 Managing operations for the greatest effectiveness.

 Increasing brand awareness.

To meet regulatory requirements- Most large companies would produce an annual report even
if the U.S. government didn’t require them to. That’s because an annual report is such a crucial marketing
and PR tool. However, because publicly traded companies must adhere to stringent regulatory
requirements, not issuing an annual report isn’t an option.