Reporting packs

Organisations prepare a financial reporting pack to present their financial performance and position. Small-scale organisations would prepare a basic set of financial statements (eg income statement and balance sheet), while medium and large-scale organisations would prepare a wider range of financial reports for the pack. Organisations large and small would then publish annual reports that are governed by financial regulations. (Listed companies that issue shares are required to publish annual reports.)

The financial reporting pack

What documents should be in a financial reporting pack? Consider the following key elements that go into a financial reporting pack.

Financial statements

• Income statement
• Balance sheet
• Statement of changes in equity
• Cash flow statement

Notes to financial statements

• Disclosures to financial statements
• How numbers are calculated to derive business segments and their performance
• Risk such as financial risk and capital risks, critical estimates

Other reports

• Review of operations and activities
• Directors’ report on financial performance
• Corporate governance statement

To support your understanding of reporting packs and how they are presented, review the template in the above video on how to prepare financial statements.

You can read through the following reports to get a basic idea of each of the above-mentioned elements.

The annual report

Most financial reporting packs include an annual report, which provides information about a company during a reporting period (eg annually, quarterly, or monthly). They are used to communicate details of corporate activities, financial results and strategies to different stakeholders. Note that annual reports are prepared in line with Corporations Act and Stock Exchange listing rules of the jurisdiction in concern.

Access the below sources to learn about how to create an annual report, and to receive some tips on how to support your design.

[1]

Read: [55+ Annual Report Design Templates, Inspirational Examples & Tips] 2

Let’s look at the items included in an annual report. We will recap some of the items we have discussed in the prior modules and then consider two items we haven’t encountered yet in more detail.

• Income statement: Also known as the statement of profit or loss, an income statement indicates the financial performance of the organisation for a particular time period. It summarises the net profit or loss for the period.
• Balance sheet: Indicates the financial position of the organisation as of a particular date. It summarises the assets, liabilities and equity of the organisation.
• Statement of changes in equity: Records all changes in equity during the financial period including transaction with owners in their capacity as owners.
• Statement of cash flows: Summarises the cash inflows and outflows during a particular time period. There are three main categories of cash flows included in the statement of cash flows: operating cash flows, investing cash flows and financing cash flows.
• Notes to financial statements: Notes that accompany the aforementioned financial statements include items such as accounting policies applied, further information on balances within the statements, disclosures not directly related to the statements, etc.

Now let’s consider the last two items that are included in an annual report: the directors’ report and corporate governance.

Directors’ report

The directors’ report of a listed company includes additional information that informs investors and shareholders about its business strategies and prospects of future financial performance.

This includes information that shareholders of the company would use to assess:

• operations of the company reported on
• financial position of the company
• business strategies and prospects for future financial years.

The directors’ report will include the names of directors and officers, membership in other committees such as audit committees and remuneration committees, as well as the remuneration report. The remuneration report includes a discussion of the board’s policy on remuneration and its relationship to company performance.

Review: [QBE Insurance Group Directors’ Report 2014] 3

This QBE Directors’ Report serves as an example of what a directors’ report looks like.

Corporate governance

Corporate governance is a system by which companies and other organisations are directed and controlled. Corporate governance typically covers the following:

• the board of directors (includes composition and roles, appointments, and performance of the directors)
• executive remuneration
• financial reporting and internal control such as audit committees to ensure the board fulfils its responsibilities
• relations with shareholders, shareholder rights and responsibilities.

Spend some time reviewing an example of a corporate governance statement compiled by western Australian farmers’ cooperative, Wesfarmers.

Read: [Wesfarmers 2019 Corporate Governance Statement] 4

Before you move on

Have you had experience with a reporting pack which was particularly effective and useful? What would you say might have made it effective and useful in reporting performance?

If you haven’t had experience with reporting packs, share with your peers, in the comment section below, what you think makes them effective for performance reporting.

Next, you will learn about new ways of reporting that allow users of financial statements to focus on an integrated view of business performance.

References:

1. How to create an annual report – annual report design tips for every business [Video]. Venngage; 2019 Oct 22. Available from: https://www.youtube.com/watch?time_continue=5&v=8VxqoFL-Huw&feature=emb_logo
2. McGuire S. 55+ Annual Report Design Templates, Inspirational Examples & Tips [Updated] [Internet]. Venngage; 2020 Feb 14. Available from: https://venngage.com/blog/annual-report-design-templates/#4
3. Directors’ Report 2014 [Internet]. QBE; 2014. Available from: https://qbe2014.qreports.com.au/directors-report/page-1.html
4. 2019 Corporate Governance Statement [Document]. Wesfarmers; 2019. Available from: https://www.wesfarmers.com.au/docs/default-source/corporate-governance/2019-corporate-governance-statement.pdf?sfvrsn=7e13cbb_0