101 on Financial Statements & Reports

An annual report is a vital tool, offering investors, stakeholders, and analysts a panoramic overview of a company’s performance and fiscal standing throughout a given year.

An annual report typically comprises various sections that are meticulously compiled to provide stakeholders with a holistic view, each section providing unique insights into different facets of the business.

In this guide, we will delve into the key elements of an annual report.

Financial Reports

The financial reports section serves as the backbone of the annual report. Key documents within this section would include:

1. Statement of Financial Position
   This is also known as the balance sheet. This document provides a snapshot of a company’s financial health at a specific point in time. It outlines the company’s assets, liabilities, and equities offering insights into the company’s overall financial standing.

2. Statement of Profit or Loss and Other Comprehensive Income
   This statement outlines the company’s revenues, expenses, gains, and losses over the reporting period, thereby providing insights into the company’s profitability. It helps stakeholders gauge the company’s ability to generate profits and offers some insights into the company’s cost management.

3. Statement of Changes in Equity
   This statement tracks changes in the company’s shareholders’ equity over the reporting period. It offers insights into the company’s capital structure and retained earnings.

4. Statement of Cash Flows
   This provides a detailed analysis of the company’s cash inflows and outflows during the reporting period, categorising them into cash flows from operating, investing, and financial activities. It helps stakeholders assess the company’s liquidity, cash management practices, and ability to generate sustainable cash flows.

Auditor’s Report

The auditor’s report offers an independent evaluation of the company’s financial statements, providing stakeholders with assurance regarding the accuracy and adherence to accounting standards.

When reviewing an annual report, scrutinising the auditor’s report is crucial for any alternative viewpoints, modifications, or concerns raised by the auditor. 

Notes to the Financial Statements

This section is often overlooked yet equally critical. The notes to the financial statements furnish additional context and detail regarding amongst others, the company’s operations, the basis for preparation, accounting policies.

Fiscal Periods

The Companies Act of 2016 leaves the determination of the fiscal year-end to the company’s discretion.

Private companies are required to prepare their financial statements not more than six months from the financial year-end. Public companies, on the other hand, must prepare their financial statements within 30 days of their Annual General Meeting, which held within six months of the company’s financial year-end.

Most companies in Malaysia opt for fiscal year-ends either on the last day of the year or the last day of a quarter.