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Don’t skip non-financial data in corporate reports

Posted by Rick Yvanovich on

Investors are usually tempted to skip the seemingly wordy introductory pages as well as footnotes. If the financial statements are all about figures and hard data, these non-financial sections of the corporate report add the “human touch”.

Don’t skip non-financial data in corporate reports

Letter to shareholders and business review

Whether investors decide to view these pages first or last during the course of reading an annual report, they should be able to determine whether management emphasises the importance of financial strength, cash flow, working capital controls and the company’s place on the competitive environment.

Read more: Intangible assets - a new financial management challenge

Well-written introductory pages describe how the company’s strategic planning process forecasts and adapts to the ever-changing market conditions, industry or competitive landscape and thus provides insight into the quality of management and their commitment to increasing shareholder value over time. Here are some tips:

  • Break the analysis into key questions
  • Seek answers to those questions
  • Identify problems if the answers are unclear or absent
  • Go over the financial review to see if the figures tell the same story
  • Read the same sections in previous annual reports to get a historical context 
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Footnotes to the corporate reports

Readers should be able to find data relating to issues such as:

  • The company’s policies
  • Inventory valuation method
  • Asset impairment
  • Investments
  • Income tax
  • Accounting policy
  • Non-recurring items
  • Employment and retirement
  • Stock options
  • Long-term debt
  • Liabilities
  • Future contracts
  • Credit and market risks
  • Fair value of financial instruments
  • Business segments

Audit reports

It is crucial that the company received a clean bill of health from external auditors. Readers should look for information relating to:

  • The credibility and qualifications of auditors
  • The steps taken to ensure the financial statements meet the approved standards of practice
  • The compliance of the Financial Statements to general accepted accounting principles (GAAP)
  • The emphasis of matters by auditors, if any 

Read more: 3 ways to weather the perfect storm of  corporate reporting

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The full whitepaper is finally here. Get it now for a comprehensive overview of corporate reports: what they consist of and how to read them effectively.

Download whitepaper “Reading annual reports:  From glancing to dissecting (part 1)”

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Topics: Financial consolidation, planning and reporting, Financial Accounting Management Software, Infor SunSystems

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 Rick Yvanovich
 /Founder & CEO/

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