What is the Annual report ? What is the additional information required in the annual report?/openbook247

What is the Annual report ? What is the additional information required in the annual report ?

Indian corporations formed under company law of 1956 or legally required to provide various information to its shareholders regarding financial results of An Accounting period. 

This annual report must contain the following :

(1) Chairman’s report, 

(2) Directors report, 

(3) Auditors report, 

(4) Balance Sheet, 

(5) Profits and Loss Account, 

(6) Notes and schedules, 

(7) Ten years past operations, 

(8) Details about employee’s etc.

Thus the annual report of a corporate sector serves the purpose of a standardised quality mirror which reflects true and fair financial pictures of the reporting entity. This annual report presentation has been gradually enhanced by the growth of various corporate sectors. Therefore, the old pattern of annual reports is no longer useful. They present various users especially in the corporate sectors like research scholar, consumers and Accounting Professional etc. Some additional information must be added to the Annual reports of a corporate entity. Furthermore Accounting standards also demand additional disclosure just like As-3, regarding cash flow statements, human resource Accounting. Inflation Accounting and social corporate reporting etc.

It is mandatory as per section 219 and 220 of the company’s Act that the directors of the company must present their Annual Accounts through Annual report to its shareholders, but now the annual reports are not only essential to the shareholders but also to the various groups interested in different affairs of the company. They expect some additional information through the Annual report.

Additional informations in Annual reports : 

(1) Management discussions and analysis, 

(2) Environment report, 

(3) Social report, 

(4) Shareholders information, 

(5) Stock market data, 

(6) Financial highlights of ten years, 

(7) Accounting ratios used, 

(8) Foreign currency transaction, 

(9) Accounting for price-level changes,

(10) Valuation of human resources.

1. Management’s discussion and analysis: 

Under this head an additional information can be provided to the users of annual reports regarding management decisions, perception and analysis of management decisions taken over during the financial year. The following are some of the decisions and analysis.

a.Overview in different financial matters.

b.Strategic moves to be taken

c.Segmental analysis

d.Technological initiatives to be taken or adopted.

e.Restructuring of business e in production portfolio, retailing and consumer care etc.

f.Risks and concerns of both internal and external 

2.Environment report : 

Corporate industrial sector in every country is serving the society by providing goods and services through destroying the environment by creating water, air and soil pollution. Most of the chemical industry renders large streams unfit, for future use. In order to protect the Environment environmental issues ISO-14000 series is given only to industrial units which are environmentally friendly. Therefore it is mandatory that annual reports must contain environmental reports along with financial issues. Therefore a regular environmental disclosure will improve the image of the reporting entity. Various companies are voluntarily disclosing environmental information in a variety of ways like press release reports etc. in order to highlight their environmental protection Act.

3.Social report: 

Financial statements prepared under financial. Accounts are mainly to serve the needs of shareholders and investors but neglects to report the social environment. Therefore the reporting entity is supposed to disclose social information to the society. Hence a social report along with financial reporting is also desirable as an additional information in annual reports. Some of the industries taken off the issues as challenge and provides social activities like:

(a) Providing medical camps, 

(b) Spreading literacy 

(c) Providing village development schemes, 

(d) Women empowerment projects, 

(e) Provides sustainable livelihood etc.

4.Shareholders information: 

Reporting entity is expected to provide full information related to its shareholders. Entities should disclose additional information like annual general meetings. Place, date etc. financial calendar period, dates of book closer, Dividend payment, registered office, listing of shares in stock market etc.

5.Stock market data : 

It is high time that in the annual report some of the additional information should be included in order to help the common investors like stock exchange performance code etc. words stock market data, stock 

6. Financial highlights of the last ten years : 

Additional users on various sites to find financial information out of the items. trend may This include of information the 10 various years will items highlightshelp in thea

are corporate sales sectors. net profit, The depreciation, items to be shown interest, in highlights operating expenses, shareholders, funds, reserves, current and fixed assets etc.

7. Accounting ratios : 

Accounting ratios on liquidity, solvency, profitability and activity can also be presented as additional information in annual reports, because the accounting ratios are one of the powerful techniques of financial analysis. The following are some of the ratios which should be presented in annual reports such as current ratio, quick ratio, return on investment, debt equity ratio, debt service ratio, working capital ratio, dividend payout ratio etc.

8.Foreign currency transaction : 

On account of liberalisation and globalisation an additional information is expected on foreign currency transactions by the companies which involved in foreign trade and the company’s which make investments in share of foreign subsidiary companies.

9.Accounting for price level changes: 

Under the conventional Accounting system financial statement does not consider the price level changes. As a result the financial statements do not disclose the true profit of the concern. Therefore, it is high time that reporting entities are expected to submit at least separated disclosure on effects of inflation on income and position statements when it can’t account for with the help of Accounting for price level changes.

10.Valuation of human resource : 

The competence and calibre of human beings working in an organisation are the real assets of an enterprise and for this resource the companies earnings are greater and gradually increased, but under the conventional accounting system the contribution of human resource has been completely ignored and only financial aspects taken into account. Therefore, it is high time to include the valuation of human resources as an asset and also point out additional information in the annual report as a supplementary slote.


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