What is an Annual Report?

The annual report is a publication issued to a company's shareholders, creditors, and regulatory organizations following the end of its fiscal year. The report typically contains at least an income statement, balance sheet, statement of cash flows, and accompanying footnotes. It may also contain a letter to shareholders, management comments, an audit report, and various supporting schedules that may be required by regulatory organizations. This document used to be a major product of the investor relations department, but it has declined in importance over time.

Advantages of an Annual Report

There are several advantages to providing investors with an annual report. One is that it gives management an opportunity to present the financial results and financial position of the business with its own interpretation and marketing spin that shows the business in the best possible light. Second, it provides a platform to talk about the organization’s governance, operations, environmental initiatives and so forth - many of which might be of deep interest to investors. And finally, it can be used to talk about the strategic direction of the business, which may be of interest to those investors who want to determine the future value of the organization.

The Difference Between an Annual Report and a Wrap Report

A less expensive annual report is the wrap report, which is a public company's Form 10-K with an annual report cover wrapped around it. This approach is used when a public company does not find it necessary to expend funds on a more expensive annual report. Wrap reports are most commonly issued by smaller public companies that cannot afford a more full-scale production.