Objectives of Annual Reporting - Essay Example

Annual Report Name Instructor’s Name Date Objectives of annual reporting According to (Ernst & Young 2008, p. 2), annual reporting has a number of objectives. Reporting is a primary mechanism that is used to impart unbiased knowledge or information regarding the organization through an informative, structured as well as economical manner. Reporting is an efficient document for accountability. Annual reports are stewardship of the company by the management and directors over the past year (Ernst & Young 2008, p. 2). Annual reports help in educating and informing the shareholders, this can be the present shareholders as well as the potential shareholders. It is a legal requirement to provide annual reports of the organization. Annual reports help in outlining the strategy as well as the future direction of the organization. Annual reports are very important since they help outlining the company’s objectives. Annual reports help in reporting of performance when the organization is under review (Ernst & Young 2008, p. 2). Annual reports key focus should be the company’s financial position as well as its financial performance reflecting its financial function as well as purpose. Reports help in explaining matters of an environmental nature along with matters important to the social obligation of the organization. Annual reports contains information that is pertinent to the shareholders in their position as owners this includes charitable donations as well as political donations (Ernst & Young 2008, p. 2). Concisely, the main objective of annual reports is to ensure accountability, especially to the shareholders. Considering that information is presented in a manner that is very complex, it has prompted emergence of other reporting types, this includes annual reviews. The main objective of annual review is to bridge the gap between shareholders expect to get from annual report as well as statutory requirements. Annual report reviews should have the following characteristics: Consistent From one year to another annual reports presented to the shareholders ought to be consistent so that its shareholders can make comparisons from the various reports that have been presented before. Nonetheless, this does not imply that business development as well as reporting that could be done to improve on the reporting format should overlooked at the expense of ensuring consistency with the previous annual reports. Straightforward Annual review of organizations ought to be written with the assumption that its shareholders are not finance or industry specialists therefore the reports should be written in a manner that can be understood easily by any person. Succinct The organizations review ought to be brief and to the point however this does not mean that important information should be left out for the sake of ensure that the review is brief or so that it can observe a specific length limit. Clarity Reports ought to be written in simple English so that its message can be understood by recipients (Ernst & Young 2008). Reporting Presently annual reports are documents, which reach many readers. In a sense, it directed and controlled way of defining the perception of the organizations various constituents. The report helps in shaping how the company is perceived by the shareholders and the public. Similarly, the storyline of the report ought to transcend the present business circumstance as well as address what can be seen beyond the horizon. The report can also be used by the company to make a desired impression as well as tell a clear and consistent story about the direction of the company. The story of the organization can be a string and an enticing picture of the near future. If the report is well written, it resonates a high stakeholder audience. The report can help to advance develop the persona of the company and therefore become a means that can be used to influence reputation and perception and buffer its financial results. Annual reports are very fundamental documents, which are a central place where the organization communicates a number of elements such as the strategic position of the organization, the main message that was used throughout the year, the direction the organization intends to take, the managers’ vision for the organization. Annual reports enable the senior communication officer to influence how the organization will position itself as well as the language to be used to pass across its main messages. Through this experience, the senior management officer can aid the manager or the Chief Executive Officer (CEO) to pass across a unified set of strategic messages. However before one can understand the message, the management ought to understand the marketplace trends as well as develop messages which are shaped by the stakeholders perception. Consequently, various strategic questions should be addressed (Goldstein, 2005, p. 2). There are a number of methods that are used in presentation of information to shareholders as well as the public. Some of these methods of presentation may not be easy to pass across the message to the targeted audience. However, some of the presentation methods are very helpful in passing across a lot of information to the shareholders and the general public, for instance, diagrams and graphs can pass across message in a simple manner that requires little illustration and at the same time does not require one to be an expert in finance or economics. Graph and charts provide support for proper business making considering the present proliferation of data warehousing as well as computer data bank. Without computer data, banks managers can become overwhelmed by the massive information that is available. Therefore, to ensure that this information can be easily accessed and interpreted at the same time it has be put in tabular form. To ensure that you present quality data to the shareholders and the general public there are a number of guidelines that ought to be considered by the person developing the graphs. First of all, show all the data clearly. Whether you are working with a time-series, relational or cross-sectional data set and the data should be formatted so that it can be clear. Secondly, the graphics to be used should be easy to read. When the presentation is neat, it enhances visual appearance of the report. It is pertinent to draw the attention of the targeted audience to the information that is very important and at the same prompting them to make comparisons of various types of data. Thirdly, when presenting the information in graphs it is important that units must be used so that the targeted audience can understand what is presented as well as compare several elements during the presentation. There are also other factors that should be considered when preparing the graphs, for example, a constant scale, indicate the source of data, avoid skewed pie charts, avoid overall false-dimensionality, avoid representing 2D data in 3D as well as avoid distorting data with a disappearing baseline (Zekany & Elsass, 2004, p. 55). Reporting in banks Banks are supposed to maintain sound accounting as well as reporting procedures as well as systems that prepare regulatory reports that conform to the generally accepted accounting principles (GAAP) or the U.S regulatory accounting principles (RAP). Banks are supposed to maintain clear and concise record that put focus on documenting adjustments as well as reconciliations when changing foreign accounting principles to either RAP or GAAP. Both foreign and domestic banks are supposed to file accurate reports. Information that is compiled from this report can be used for a number of purposes. For instance, enhancing timely identification as well as signaling of problem situations which can threaten the quality of reporting institutions, it ensures prompt implementation of prompt-corrective-action provisions that are required in banking legislations as well as evaluating financial conditions as well as the position of reporting institution by the general public, this includes, depositors, investors a long with creditors. Call reports aid in preparing Uniform Bank Performance Report (UBPR) that uses analytical procedures as well as ration analysis to detect unusual changes in banks condition as well as position. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) along with the Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA) gave authority to the Federal Reserve so that they can assess civil money penalties against bank holding companies, state member banks, as well as foreign institutions that file false, late as well as misleading regulatory reports. The reports ought to be reviewed by the examiner so that he can verify the accuracy of the report as well as ensure that the reports meet both regulatory and statutory requirements. The type as well as extent of financial report and disclosures depends on the size and features of the financial institutions. Call reports are instrumental in ensuring customization of banks supervisory approach to activities as well as risks that are undertaken. Initially, bank prepared their annual reports in response to requirements of its shareholders and in compliance with the requirements of the regulatory bodies. Presently, banks annual reports have become a mandatory document to fulfill regulatory requirement than just a mere communication tool for offering reliable, relevant as well as pertinent financial information to the banks shareholders. The annual report ought to have (1) comparative financial statements that include income statement, balance sheet, statements of cash flows a well as statements of changes in owners’ equity; (2) report showing the management’s responsibility for making annual financial statements as well as an auditor’s report on the banks annual statements that are audited according to the generally accepted auditing standards (GAAS). The management is responsible for fair presentation of banks financial statements according to the generally accepted accounting principles by developing and maintaining a transparent accounting information systems as well as an adequate and effective internal control structure. An auditor who is independent give credibility, reliability as well as objectivity to the banks financial statement through giving opinion about the presentation of the banks financial statement that conforms to the GAAP. References Ernst & Young 2008, Reporting to shareholders: A good practice guide, Goldstein 2005 ‘Unleashing the power of the annual report at DTCC’: Report information from ProQuest. Viewed 24 November 2013, >htt://ezproxy.lib.uts.au/login?url=http://search.proquest.com/docview/203598458?accountid=17095>. Zekany, K & Elsass, A 2004, ‘Great Graphics: How to illustrate financial information the right way’: Strategic Finance. Vol 85. No. 9 PP.52-55. Read More