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Annual Reports: Functions, Components and its Requirements

Why do companies need an annual report? The annual report is a mandatory publication for companies that already have legality, especially those in a PT (Limited Company). It is meant to be made as a report to be published on every year. Annual reports help readers determine what the company owns. It also includes the achievements of the company and its employees. The purpose of it is to make stakeholders feel good about their investments in the company. Creating an annual report certainly requires an ERP system for a more efficient operational process. 

Annual Report

Daftar Isi

What is the Annual Report?

An annual report is a report that describes the development of a company in a one full year period. The contents of the annual report will usually be very detailed, such as discussing the management, the performance of the company has been serving throughout the year, and lastly, the annual financial report. It aims to attract investors to invest in the company. After that, the company will distribute it to the OJK (Financial Services Authority). However, general public and stakeholders can also read it. The forms contains various kinds of views, such as graphics, photos, and illustrations to create good imaginations that are easy to understand for public consumption.

What are the Functions of the Annual Report?

The function of the annual report is for external users who want to see the contents of the company’s condition in detail. Companies produce it in a more attractive and communicative way than a financial report. It aims the external users to consider to put the investment better on the company. It is also to inform the general public about the plans of the company wants to achieve in the future. The use of annual report is a publication tool to the public.

Source: causevox.com

The Components of the Annual Report

It requires several components to provide a clear picture of the prospects of the company, these components consist of:

  1. Letters to stakeholders or shareholders
  2. Financial developments condition from year to year
  3. Management analysis
  4. Management records and financial reports
  5. Company internal control records
  6. Auditor’s statement of the finance
  7. Financial statements

The financial statements in the annual report must include several components into the making of it. These components are:

  1. Balance
  2. Income statement
  3. Stakeholder’s equity
  4. Company cash flow
  5. Notes on financial statements
  6. List of company directors and commissioners

Financial reports with annual reports are two different things. This is the thing we should fix due to the misunderstanding part we’ve all been facing this whole time. Financial statements are the reports that are related to the information of the financial accounting system. You need to produce a very well-detailed financial reports. And you need to use the best accounting software as a tool for compiling your financial reports.

Financial report is usually used for internal purposes and contains of financial information only. The goal is to provide information on investments, credit, and others. Meanwhile, the goal of the annual report is to increase the attractiveness of the company in the eyes of the public. It contains of the company’s achievements which has also summarized all financial statements that the company has achieved within a year.

Source: sharesmagazine.co.uk

The Requirements

Making an annual report is in fact not an easy step to do. It must meet certain types of criteria to the people that will read it later. The main criteria of a qualified report would be:

  1. Readers can understand it well

The report can be categorized as a good one if we can understand it easily. The report must serve a good view of the company’s performance. It should be containing the goals that the company wants to achieve in the future as well. This is why reports must be clear and vivid in order to be understood easily.

2. Relevant and valid

The company must make a report according to the time of each event that happens without any added statements. Although it is a marketing tool to show the company off, but it is best to include occasions that have actually occurred. In other words, it must be in accordance without any form of manipulation. If there is an indication of it isn’t done correctly, the annual report will be invalid.

3. Detail and clear information

Another criteria required is a detailed information related to the company. You have to make sure to not provide any unclear information. It is meant to increase the credibility of the company. When you are making the report, you need to do a cross-check activity of all the information and data.

Conclusion

By making an annual report, the company can easily inform about all activities in one year. In addition, the company can convince the public with the company’s future business plans. Of course, to produce it, you are going to need to produce a very well-detailed financial reports. With the help of HashMicro that is able to identify your potential prospects easier, we can serve you the most comprehensive and integrated CRM system ever. We surely can ensure you that service for the betterment of your company!

Annual Report

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