Annual Reports

Annual Report: "Provides information about a company's financial condition" (Miller-Nobles, 2016, p.386).

"The annual report to shareholders is a document used by most public companies to disclose corporate information to their shareholders. It is usually a state-of-the-company report, including an opening letter from the Chief Executive Officer, financial data, results of operations, market segment information, new product plans, subsidiary activities, and research and development activities on future programs" (SEC, 2017).

why?

• "Company annual reports provide information on the health of your company to shareholders, stakeholders, the media and your community" (Leviticus, 2017).
• "The annual report tells shareholders what the company's strategy is for increasing revenue in the coming year" (Leviticus, 2017).

What does annual report contain?

• Management's Discussion and Analysis of Financial Condition and Results of Operations.
• Report of Independent Registered Public Accounting Firm.
• Financial Statements
• Notes to Financial Statements

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A):
"The section of the annual report that is intended to help investors understand the results of operations and the financial condition of the company"

Report of Independent Registered Public Accounting Firm:

"Although clearly not a guarantee of investment performance (which is affected by many factors), the independent audit's overriding goal is to contribute to investor confidence by providing reasonable assurance of the fair presentation of a company's financial statements" (Kuppers & Sullivan, 2010).

Financial Statements in annual report

• Balance Sheet
• Income Statement
• Statement of Stockholder's Equity
• Statement of Cash Flows

Balance Sheet:
"Provides valuable information to financial statement users about economic resources the company has (assets) as well as debts the company owes (liabilities). Allows decision makers to determine their opinion about the financial position of the company"

Income Statement: "Provides information about profitability for a particular period for the company"

Statement of Stockholders/Owner's Equity: "informs users about how much of the earnings were kept and reinvested in the company. Shows the changes in the owner's capital account for a specific period"

Statement of Cash Flows: "Reports on a business's cash receipts and cash payments for a period of time"

Notes to Financial Statements: "these notes include a summary of significant accounting policies and explanations of specific items on the financial statements"

HOW DO YOU APPLY AS A PROFESSIONAL?

eNTRY lEVEL:

• You may be helping to prepare the report.
• Do you want to invest in your company stock?

Mid LEVEL

• Overseeing annual report?
• Investing in company stock?

Professional level

• Oversees final copy of Annual Report
• Contributes on the notes on Financial Statements
• Investing in company stock

Ethics:
"Financial statement fraud is a deliberate misrepresentation, misstatement or omission of financial statement data for the purpose of misleading the reader and creating a false impression of an organization's financial strength. Public and private businesses commit financial statement fraud to secure investor interest or obtain bank approvals for financing, as justification for bonuses or increased salaries or to meet expectations of shareholders" (Bradford, 2017).

"All day long they distort my words; All their thoughts are against me for evil" (Psalms 56:5).

References:


Bradford, C (2017). "What Is Financial Statement Fraud?." Chron. Retrieved on August 5, 2017 from http://smallbusiness.chron.com/financial-statement-fraud-57182.html

Leviticus, J. (2017). "What Is the Purpose of Company Annual Reports?" Chron. Retrieved on August 5, 2017 from http://smallbusiness.chron.com/purpose-company-annual-reports-57428.html

Miller-Nobles, T., Mattison, B., & Matsumura, E. (2016). Pearson Custom Library: Horngren’s Accounting. 11TH Ed. Fundamentals of Corporate Finance. 3RD Ed. Boston, MA; Pearson Learning Solutions.



US Securities and Stock Exchange. (2017). "Annual Report." SEC. gov. Retrieved on August 5, 2017 from https://www.sec.gov/fast-answers/answers-annrephtm.html