Case Analysis: The Annual Report 1. The basic factors of communication that must be considered in the presentation of the Annual Report are compliance with accounting principles and regulations, accuracy of the information presented, and how much information you are going to disclose. The management has a lot of control over what and how much information it wants to disclose to the users of their financial report. Users can be shareholders, investors, customers, or if you want it or not, competitors. Therefore management doesn’t want to disclose too much strategic details about their future plans. However, it also has to attract prospective investors and therefore needs to give them enough information about the companies’ health. 2. One part of the Annual Report that is very interesting for investors is the Management’s Discussion and Analysis section. It gives the user of the financial report more specific details about how the company has done that year and contains information that cannot be found in the financial data. This section can include coverage over any favorable or unfavorable trends and any significant events or uncertainties in the areas of liquidity, capital resources, and results of operations (Ormiston, 2013).
Another section of the Annual Report is the Proxy Statement. It is required by the SEC and solicits shareholder votes as many shareholders don’t attend shareholder meetings. This section also contains voting procedures, background information about nominated directors, executive compensation, etc. This information helps investors and creditors by providing information about the longevity and compensation of the companies’ top management as well as corporate governance (Ormiston, 2013). 3. One advantage of stating well-defined corporate strategies in the Annual Report is to attract investors. Prospective investors in your company want to see that your company is healthy and that you are generating cash flows from operations.
References: Ormiston, A., & Fraser, L. M. (2013). Financial Statements. Understanding financial statements
(10th ed., p. 12). New York, NY: Pearson Education.