• An annual report is a document produced annually by companies designed to portray a true and fair view of the company’s annual performance, with audited financial statements prepared in accordance with company law and other regulatory requirements, and also containing other non-financial information.• The Companies Act 1985/9 requires companies to publish their annual report and accounts.• It should include:– A balance sheet– A profit and loss account– A cash flow statement– A Directors Report
Stakeholders in the annual report• Shareholders (the owners of the business).• Potential shareholders.• Managers and employees.• Creditors and potential creditors.• Suppliers – especially if the supply goods on credit.• Employees and their trade unions.• The government – for tax purposes.
Functions of the annual report• The stewardship and accountability function– Reporting to shareholders.• The decision making function– To provide information about performance and changes in the financial position of an enterprise that is useful to a wide range of users in making economic decisions.– Providing users, especially shareholders with financial information so that they can make decisions such as buying or selling shares.• The public relations function– The annual report is an opportunity to publicise the corporate image
A true and fair view• Directors are responsible for the preparation of the accounts which must give a true and fair view.• A true and fair view is one where accounts reflect what has happened and do not mislead the readers.• The accounts must be prepared in accordance with relevant accounting standards.
Information to be included • The rules governing the content of the annual report are derived from:• Statute law - the Companies Act • Accounting standards• Stock Exchange rules• Codes of best practice in corporate governance.
Companies Act 1985/9• Directors have stewardship of limited companies.• Directors are required to publish accounts which show a true and fair view of the company’s financial position.• Accounts must be sent to:– All shareholders– All debenture holders– The Registrar of Companies at Companies House.– This must be done within 10 months of the year-end for a private company and within 7 months of the year end in the case of a public company