Another interesting bunch of people reading the annual report are the competitors. They are generally looking to see how you’re doing, what are the financial ratios, market share etc. Something they also always look at is how much are you earning and what is your gross margin.
As you may have guessed, it is a fine balance this sharing information part in your annual report. On one hand the legislation, accounting and reporting framework ask you to disclose as much as possible to enable readers make just decisions. The regulation usually asks to also disclose information that is more or less confidential or something you certainly don’t want competitors to know. Either it is rental agreement terms, loan information, acquisitions pricings etc.
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There are so many things you need to watch out when preparing an annual report – complete table of content, numbered pages, proper headers, footers, appropriately ordered notes etc. And it’s only the structure of the report – the content itself needs to be neat and tidy as well – same terminology, no typos, cross-references where applicable etc. All that fuss and for what?
Having an organized annual report does have its benefits. First off it is readable to any outside party – they can follow the information from accurate table of content, trace what they are looking for by using the cross-references and if the report starts off with financial statements and they are followed by the notes, it will all also be in logical sequence. A number one goal for the annual report is to be readable, understandable and clear.
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You most probably prepare the annual report just this once in a year. For you it’s not that important as you have your everyday accounting issues and things to do, but the management, owners and maybe even some third party is so eager to get the report. Where your interest is fairly low, it is to be expected that mistakes are bound to happen. You may forget something; simply overlook mistakes or discrepancies and so on.
One thing that would prevent this from happening is obviously timely preparation and starting with it earlier, however, what also helps, is having a checklist. The more detailed the list, the better it is. It ensures you have all the right and needed stuff done, helps you to remember things you usually overlook and keep record of what is already done to the annual report. As the preparation is a long process, keeping track is crucial.
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Although the financial year may not yet be over, it’s most probably getting close to the end. And what happens in the end is a complete chaos and overtime. It all comes with the expense of family, your own time and sanity more or less. The closer the finalizing the annual report to the year end is, the worse it gets. You have to close the year, make all the yearend procedures, communicate and be part of audit if applicable and needed, and as if this wasn’t enough, you need to prepare, amend and present the management board with an annual report for the financial year. And all this needs to be done in a very limited timeframe.
Now to focus a bit more on the annual report – in most parts it stays the same every year. The numbers change, and all respective text alongside with them, but the structure stays the same more or less over the years. To avoid some of this mentioned above and make your life easier, we suggest starting with the preparation of the annual report already in autumn – a couple of months before the financial year ends. You may go over bits of it with your auditor to ensure there are no major amendments coming later on, put in all prior year figures, add in texts applicable to this year, make all design changes if possible and suitable and so on. Basically take the report to the stage that it only needs financial year end numbers and an update (and if needed, some new) to the texts already prepared earlier.
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What is usually stated, is the fact that a company ‘operates’ in specific field of industry. On the IFRS Income Statement the results of such activities are reflected under ‘continuing operations’. This is to simplify things however.
The phrase ‘continuing operations’ means a bit more. As you may guess, the stress is on the word ‘continuing’. Continuing is something that is expected to and will do so in the future as well. Continuing operations are those that generate revenue through sale of goods or providing services in coming periods, meaning for a longer period than 12 months. The management expects to have those activities up and running and hence their results are disclosed under ‘continuing operations’. From this the readers of the financial statements and annual report and investors can see how much money is made through ongoing business activities.
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