What is important in an annual report?
The basic purpose of an annual report is to provide a clear and accurate picture of the position and performance of the institution. But an annual report can be much more than just an account of the past year. If you stay within the framework, there are great opportunities to make the report a cornerstone of the company's internal and external image creation and brand-building communication. Here we describe what an annual report should and must contain to fulfill its purpose.
Holistic view of the company
A well-thought-out annual report creates meaning and significance for anyone who wants to know more about the company, its business and the world around it - whether you are a curious employee, customer or investor. It presents the company in an objective but positive way, explains the business strategy and paints a picture of where the company is heading. In many contexts, the annual report is the best document for those who want to get a holistic view of the business, not just the snapshot but also the vision for the future.
Front and rear carriages
An annual report usually consists of a front and a back section. Generally speaking, the front carriage consists of more descriptive and to some extent selling texts and images, while the back carriage is more fact- and figure-based. The front end often consists of a section where the CEO, President or Chairman of the Board has the opportunity to give a slightly more personal perspective on the company by putting figures in context and describing where the company is heading. It also often includes a description of the business environment to put the company in the right context and something that has become increasingly common is to also add a clear case aimed directly at those who want to invest in the company. Of course, sustainability work is a natural part of the front end if you do not choose to make a separate sustainability report.
Facts and requirements
All limited companies, certain partnerships and economic associations are required by law to compile their financial year in an annual report that is public. The content is determined by the Annual Accounts Act, ÅRL (1995:1554), which in turn is based on directives from the EU and contains provisions on how annual accounts, consolidated accounts and interim reports are to be prepared and published. The annual accounts covered by the Annual Accounts Act must be clearly presented, give a true and fair view of the company's financial position and results, and comply with generally accepted accounting principles. Transparency means that the annual accounts must be presented systematically, in an easily accessible manner and with ample opportunities for overview. The true and fair view of the entity's financial position and results of operations should comprise the entity's balance sheet, income statement, notes and management report. The last directive, generally accepted accounting principles, means that the annual accounts must be prepared in accordance with the applicable laws and practices.
Content of the annual report
An annual report must include a balance sheet, income statement and directors' report. The balance sheet shows the company's financial position, assets, equity and liabilities at a given point in time. The income statement shows the company's performance by summarizing income and expenses during the financial year. The notes are disclosures such as how assets and liabilities have been valued, how depreciation and impairment losses have been recognized and what the cost of these depreciations was. The Directors' Report is an overview of the company's results and position and should include information that cannot be included in the balance sheet and income statement, such as developments and significant events.
Principles of the annual accounts
The annual accounts must follow certain accounting principles in the preparation of the balance sheet, income statement and notes. The first principle is the going concern principle, which means that the entity should be expected to continue in business for the foreseeable future. The second is the consistency principle, which means that the same valuation principles should be used year after year. The third, the prudence principle, means that assets, liabilities, income and expenses should be valued prudently. And the fourth, the continuity principle, means that the opening balance sheet should be consistent with that of the previous financial year.
Submission of annual accounts
Once an annual report has been compiled, it must be submitted to the Swedish Companies Registration Office for publication. In addition, limited liability companies and economic associations must submit a proposal for the allocation of profits or losses. Finally, the annual report must be signed by all board members and the CEO. If the annual report is for a larger company, a cash flow statement must also be included. The annual report must be submitted to the Swedish Companies Registration Office no later than seven months after the end of the financial year. All annual reports must also have an original certificate of approval, signed by hand on paper or with e-identification in our e-service for digital submission. The certificate of approval certifies that the annual accounts have been approved by the Annual General Meeting. If you want to know more about what is important in an annual report, you can find a lot of good facts on the website of the Swedish Companies Registration Office.
The annual report is important
It takes a lot of time and resources to create a really good annual or sustainability report. Strategies are evaluated, ideas are clarified, interesting projects are highlighted and the future is mapped out. But, despite the hard work, they are often just two items ticked off at the general meeting. It's time to make the annual report one of your company's most important brand-building and relationship-building communication tools. At Navigator, we help our clients to fully utilize the potential of the annual report to strengthen the brand, while placing great emphasis on ensuring that the investor-related information is well-structured and well thought-out.
Why Navigator?
We decided to get really good at producing annual reports a few years ago. We at Navigator:
- Likes what is complicated
- Has developed a well thought-out process
- Help create 5-10 annual reports per year
- Seeing the accounts as some of the company's most important communication tools
- Make the reports an integral part of your branding
Examples of annual accounts
Here are some of the annual reports we at Navigator have produced in recent years - examples of annual reports
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