The objective of an Annual Report is to give those wide ranges of users the information they require and desire from the report. It’s a lot of pressure put on the management and to a single document considering that the range of users is differencing quite considerably.

How could all this be achieved? Obviously by being understandable, putting you into the shoes of the users and by not giving out too much, just enough as is necessary. In fact the key message here is to enclose as much information as is necessary and as little as possible. It’s a fine balance that you as the preparer of the report want to keep. Your competitors may be eager to know your internal information, but you really don’t want to give them that.

What you’re required to show and explain are your position of assets, liabilities and equity, your income and expenses. By showing we mean the numbers and by explaining we mean the notes with added information that helps readers to understand the content behind the number. Normally this “explanation” is really just a detailed break down into line items, i.e. there are operating expenses on your income statement and what you do in notes is show what those operating expenses comprise of (like transportation, rent and so on).

At the end of the day what you must ensure is that every significant figure in your report is clearly commented with additional information and if applicable, indicated with cross-references.