Annual Reports of McDonalds Corporation and Yum Brands Inc - Case Study Example

Annual reports Introduction Annual reports are sets of information that organizations present to communicate their performance in operational and financial activities in the preceding year. The reports target organizations’ shareholders and other interested parties. In this paper, I review annual reports of two corporations, McDonalds Corporation and Yum! Brands Inc., to explore their approach to communicating annual performance, their goals, challenges and plans, as well as effects of the organizations’ annual report formats on communicating the intended information.

Perceived differences in the organizations’ approach to presenting their annual results Organizations use different approaches in presenting their annual reports. Such difference may arise from content organization of the major elements of an annual report or may be due to order of arrangement of the report’s sections. In content organization, and with major focus on presentation of financial items, the financial statements may be presented in either account form or in a report form. The major difference between the two forms is in their orientation.

While the report format is horizontally presented, the account format is vertically presented. The financial statements can also be communicated in exact figures or round off figures. Similarly, a report can document each item of the financial statements or group items and present their cumulative values (Nikolai, Bazley and Jones, 2009). Reports may also vary in the order of presentation of the major elements such as financial statements, “management discussion and analysis,” “report on adequacy and internal control,” among other sections (Warren and Reeve, 2006, p. 681). A review of annual reports of McDonalds and Yum Brands communicates a number of differences in the organizations’ approach to communicating their annual reports.

The first major difference is in the order of presentation of the reports sections. McDonalds’ annual report begins with management’s discussion and analysis of the corporation’s performance, both financial and operational. Presentation of financial statements that is facilitated by explanatory notes follows this before reports on the organization’s internal control system and reporting (McDonalds, 2011). Yum’s report however begins by presenting the annual meeting before accounting for the organization’s activities in which it presents financial statements.

The reports’ outlines therefore communicate McDonalds focus on reporting its financial performance while Yum prioritizes information regarding its planned decisions on management and human resource. Both organizations however clearly presented their reports that can facilitate inferences and informed decisions. Their reports are organized under sub titles and the financial statements are presented in standard vertical format that is common to stakeholders (Yum, 2011; McDonalds, 2011). The organizations’ identified goals, challenges, and plans McDonalds’ report identifies a number of plans for either retaining its competitiveness and market share, or improving its current position.

Its report expressed its plans to improve on its favorite supplies and at the same time diversify its products. It also expressed intensions of improving its facilities to reflect on customers’ dynamic expectations and to meet employees’ needs for higher levels of efficiency and effectiveness. Improvements would be achieved through remodeling available facilities. Even though the organization’s report does not explicitly communicate its objectives and challenges that hinder such objectives, these can be derived from the management’s expression of the organization’s driving factors and its plans.

The organization’s plan to improve on its existing products for example identifies the goal of improving its customers’ utility level and retaining its existing customers. The plan also identifies the objective of attracting more customers. The organization also aims at increasing its revenues and sustaining its growth through product diversification. Competition, thought not identified in the report, appears to be the organization’s major challenge to increasing its revenue level and market control (McDonalds, 2011).

Yum’s goal is however to become a globally recognized organization in the foods industry. Other goals that are expressed as both objectives and plans include developing a culture that appreciates all stakeholders, developing dynamic brands, and caring for stakeholders’ needs, both internal stakeholders and external stakeholders. The organization does not communicate its challenges but customers’ diversity and distance are identifiable from its global scope of operations and its goals (Yum, 2011).

How the format and organization of each report affect the communicated information The two report formats succeed in communicating the organizations’ information. Even though the reports identify differences in sections’ arrangement, each section was presented comprehensively, by sub titles, approach that enhances communication. The reports’ application of the common vertical format for communicating financial statement also enhances communication of the financial reports because most stakeholders understand the approach (Yum, 2011; McDonalds, 2011).

Conclusion The two reports differ significantly in their order of presenting different sections of financial reports. McDonalds major goals are improving its customers utility through quality and product diversification in its competitive market while Yum’s main objective is to be a global market leader with high regards to its stakeholders’ interest. The reports’ well-documented formats with familiar accounting documentation enhance the information through easy identification and understandability.

References McDonalds. (2011). 2011 Annual report. Retrieved from: http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Investors%202012/2011%20Annual%20Report%20Final.pdf. Nikolai, L., Bazley, J. and Jones, J. (2009). Intermediate accounting. Mason, OH: Cengage Learning. Warren, C. and Reeve, J. (2006). Financial and managerial accounting. Mason, OH: Cengage Learning. Yum. (2011). Yum! Brands 2010 annual customer mania report. Retrieved from: http://www.yum.com/investors/annualreport/10annualreport/downloads/pdf/2010AnnualReport.pdf.