Annual reports continue to play a pivotal role in businesses’ governance and financial transparency, but the Financial Reporting Council (FRC) has revealed that many are falling short.
The FRC found that many reports lacked meaningful insight and businesses must improve their reporting to build trust and relationships with investors and partners.
For businesses of all sizes, high-quality annual reporting is a legal responsibility and with the right support, you can compile a clear and comprehensive report.
An annual report is a detailed document that sets out a business’s financial performance, governance agreements and direction over the previous financial year.
In the UK, all limited companies are legally required under the Companies Act 2006 to prepare an annual report and file it with Companies House, ensuring transparency for existing and potential stakeholders.
Depending on the size and nature of the company, annual reports must comply with UK Generally Accepted Accounting Practice (UK GAAP) and International Financial Reporting Standards (IFRS).
The purpose of an annual report is to provide clarity and an honest account of how a company has performed.
Corporate annual reports do differ from mutual fund annual reports as they are set to provide investors with detailed information about portfolio holdings, investment plans, fees, risks and performance metrics.
With the right support, we can ensure that your annual reporting meets regulatory standards and help you prepare the required financial reports.
In its first review of annual reports from companies applying to the Wates Principles, the FRC called for significant improvement.
The regulator found that many annual reports contained excessive replication, largely because different teams within the company prepared sections separately.
The FRC found that many companies only disclosed information about the parent-company board, without explaining the governance structures at the entity level.
This gap makes it difficult for stakeholders to understand how decisions are truly made and how accountability is exercised in the company.
To address these issues, the FRC has urged companies to produce annual reports that are cohesive and informative, as well as cross-referenced.
With expectations rising, businesses should ensure they have the right compliance and guidance to produce reports that meet stakeholders’ needs.
A high-quality annual report typically includes several elements, including:
Many companies also include a Corporate Social Responsibility (CSR) section to demonstrate their commitment to ethical and sustainable practices.
Although these requirements may feel overwhelming, professional guidance can help your business ensure your report is accurate and well-structured.
Annual reports play a vital role in improving transparency and accountability, giving stakeholders a clear view of how a company is managed and how it intends to grow.
Investors and lenders rely on annual reports to make informed decisions, evaluate financial stability, potential risks and long-term prospects.
A high-quality annual report should comply with the relevant accounting standards, laws and regulations.
To produce a successful report, businesses should include:
With the FRC calling for clearer and more insightful reporting, now is the right time for your business to review and improve the quality of your annual reports.
Our expert team can help you prepare your financial reports in accordance with GAAP and present your financial statements to stakeholders.
We will guide you on attracting new investors or lenders and support you with audits and strategic decision-making to help your business stay compliant and potentially grow.
For expert financial advice and support, contact our team today.
