Annual Report New Financial Statements.ppt

Annual Report

1. ANNUAL REPORT

2. ESSENTIAL COMPONENTS OF ANNUAL REPORT
The components of an annual report which are
essential for analyzing published financial
statements are:
Chairman’s Speech.
Financial Highlights
Directors’ Report
Management Discussion and Analysis (MDA)
Audited Financial Statements
Auditors’ Report
Notes to Accounts (which should ideally include the
significant accounting policies)

3. READING PUBLISHED FINANCIAL STATEMENTS
Five-step approach:
Read the accounting policies.
Mark on the face of the Balance Sheet and Profit and
Loss Account the important observations of Auditors’
report and notes to account.

Read carefully each item (along with its schedule) of
Balance Sheet and Profit and Loss Account.
Make necessary adjustments
Proceed to use the (adjusted) numbers in the financial
statements for ratio analyses purposes.

4. Understanding Published Financial
Statements
Read the audited financial statements along with notes
to accounts and auditors’ report carefully.
The audited financial statements convey the asset
liability structure and financial results of a company.
Each set of financial statements projects unique features
of the firm.
Chairman’s speech, Directors’ report and MDA should
be read to gain more insights into the current activities
and future outlook of a company.

5. 
Accounting policies refer to the accounting norms followed by the
entity while reporting financial elements. Read the accounting
policies carefully before analyzing figures in the Balance Sheet and
Profit and Loss Account.

The Schedules to the Balance Sheet and Profit and Loss Account
contain details about each major elements in the financial
statements.

Make necessary adjustments, if any, based on auditors’ observation
against the reported numbers in the financial statements. For
example, the auditors may highlight understatement of liability or
overstatement of asset in the financial statements. Necessary
adjustments should be made before using those affected financial
elements.
Understanding Published Financial
Statements