PP for Chapter 5 - Annual Report

8/7/2019 PP for Chapter 5 - Annual Report

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Company Annual ReportCompany Annual Report


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6. Tell when FRS 101 takes effect, list the requirements,

the new amendments and interpretation, and

describe what other reporting efforts that MASB has

been encouraging for IFRS convergence effort.

7. Recognize the current financial reporting practices by

companies in Malaysia.

8. Illustrate the basic components of a comprehensive

annual financial report (CAFR).

After completing this chapter, you should be able to:


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Explain what an annual report is.

Objective 1Objective 1

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Basically:

it is a formal comprehensive published business

document given to shareholders and other interestedpersons by public companies or corporations,

providing them with valuable information about the

companys activities throughout the preceding year to

help them make informed business or economic

decisions.

basic purpose of the annual report is to let the

shareholders know how well the business of the

company is doing financially and non-financially.

details the companys activities, financial

performance and status of the company with various

reports and financial statements.


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List the content of an annual report.


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Basic Content of Company Annual Report

Corporate information and structure Financial highlights

Chairman's report

CEO's report

Profile of Board of Directors

Auditor's report on corporate governance Mission statement

Corporate governance statement of compliance

Statement of directors' responsibilities

Invitation to the company's Annual General Meeting

Shareholding analysis

List of company properties

Proxy form

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Basic Content of Company Annual Report

Financial statements and related informationincludes in the Annual Report are:

Internal control statement

Audit committee report

Auditor's report on the financialstatements

Balance sheet

Statement of retained earnings

Income statement Cash flow statement

Notes to the financial statements

Accounting policies

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Demonstrate the items in financial reporting


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Main Items in Financial Reporting

1. Directors Report

2. Auditors Report3. Financial statement includes the following:

Balance Sheet

Income Statement

Statement of Changes in Equity

Cash Flow StatementNotes to Accounts

4. Directors Statement

5. Statutory Declaration

Note:

The Income Statement, Balance Sheet, and the Statement of Changes inEquity must be prepared according to the provision under Schedule

Nine (9), Company Act 1965 and FRS101.

If there are subsidiaries or associated companies, there must be a

consolidated income statement, a consolidated balance sheet, astatement of changes in equity, and a consolidated cash flow

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Briefly explain the objectives of financial reporting


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1. to provide information that is useful to existing and

potential investors, creditors, and other users in making

rational investment, credit, and similar economic

decisions.

2. to provide information that is useful to existing and

potential investors, creditors, and other users in

assessing the amounts, timing, and uncertainty ofprospective cash receipts from dividends (owner

withdrawals) or interest and the proceeds from the

sale, redemption, or maturity of securities or loans.

3. to provide information about the economic resourcesof an entity, the claims to those resources (obligations

of the entity to transfer resources to other entities and

owners equity), and the effects of transactions, events,

and circumstances that change its resources and claims

to those resources.

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Thus, Financial Reporting should provide:

1. information about an entitys past performance as a

basis for prediction of future business performance,

2. focus on earnings and its components, despite the

emphasis in the objectives on cash flows. Earnings

computed under the accrual basis provide a better

indicator of the ability to generate favorable cash flowsthan statements prepared under the cash basis,

3. information that may be useful to measure the value of

the business,

4. information to persons who wish to evaluate

managements performance, predict earnings, assess

risk, or estimate earning power

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Describe the statutory and regulatory

requirements showing the provision of

the acts, regulations, and guidelines for

financial reporting practices in Malaysia


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Statutory and Regulatory requirements:

Financial Reporting Act 1997,

Company Act 1965 (amended),

Securities Industries Regulation 1999,

Bursa Malaysia Listing Requirements (plus KLSE Revamped ListingRequirements (2001) ,

MASB 2009

Income Tax Act 1967,

Securities Commission Revamped Requirement 1995, and

other rules related to any industrial and regulatory requirements

relevant to each industry.

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Tell when FRS 101 takes effect, list therequirements, the new amendments and

interpretation, and describe what other

reporting efforts thatMASB has been

encouraging forIFRS convergence effort.


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In August 2008, the Malaysian Accounting Standards Board

(MASB) planned for a full convergence with IFRS by January 1,

2012.

IFRS was issued by the IASB whose mission is to develop, in the

public interest, a single set of high quality, understandable and

IFRSs for general purpose financial statements.

the changeover from the Malaysian Financial Reporting Standards

to the IFRS is hoped to place Malaysian businesses on a level

playing field with its international counterparts.

from January 2011, Malaysian companies are expected to be

preparing their first set of the IFRS-based comparative financial

statements while March 2010 is the target date for their firstinterim financial statements based on FRS 139 financial

instruments standard.

In Malaysia, improvements to FRSs issued in September 2009

have incorporatedIASBs annual improvements issued in May

2008 and April 2009.

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Recognize the current financial

reporting practices by

companies in Malaysia.


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By the end of September 2009, MASB is catching up with IFRS and toBy the end of September 2009, MASB is catching up with IFRS and to--

date,date,

there are at least six new or revised standards,there are at least six new or revised standards,

six new interpretations, andsix new interpretations, and various amendmentsvarious amendments

that are expected to take effect from January 1, 2010.that are expected to take effect from January 1, 2010.

FRS 7,FRS 7, Financial Instruments: DisclosuresFinancial Instruments: Disclosures is applicable to ALL entities.is applicable to ALL entities.

The extent of disclosures required of an entity depends on the level ofThe extent of disclosures required of an entity depends on the level of

financial instruments entered into, and the extent and nature of thefinancial instruments entered into, and the extent and nature of the

entitys risk exposures.entitys risk exposures.

FRS 8,FRS 8, Operating SegmentsOperating Segments is applicable to entities whose debt oris applicable to entities whose debt or

equity instruments are publicly traded or in the process of listing.equity instruments are publicly traded or in the process of listing.

It requires operating segments to be identified on the basis of internalIt requires operating segments to be identified on the basis of internal

reports that are regularly reviewed by the entitys chief operatingreports that are regularly reviewed by the entitys chief operating

decision maker to allocate resources to the segment and to assess itsdecision maker to allocate resources to the segment and to assess its

performance.performance.

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By the end of September 2009, MASB is catching up with IFRS and toBy the end of September 2009, MASB is catching up with IFRS and to--

date,date,

there are at least six new or revised standards,there are at least six new or revised standards,

six new interpretations, andsix new interpretations, and various amendmentsvarious amendments

that are expected to take effect from January 1, 2010.that are expected to take effect from January 1, 2010.

FRS 7,FRS 7, Financial Instruments: DisclosuresFinancial Instruments: Disclosures is applicable to ALL entities.is applicable to ALL entities.

The extent of disclosures required of an entity depends on the level ofThe extent of disclosures required of an entity depends on the level offinancial instruments entered into, and the extent and nature of thefinancial instruments entered into, and the extent and nature of the

entitys risk exposures.entitys risk exposures.

FRS 8,FRS 8, Operating SegmentsOperating Segments is applicable to entities whose debt oris applicable to entities whose debt or

equity instruments are publicly traded or in the process of listing.equity instruments are publicly traded or in the process of listing.

It requires operating segments to be identified on the basis of internalIt requires operating segments to be identified on the basis of internal

reports that are regularly reviewed by the entitys chief operatingreports that are regularly reviewed by the entitys chief operating

decision maker to allocate resources to the segment and to assess itsdecision maker to allocate resources to the segment and to assess its

performance.performance.

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Illustrate the basic components of a

comprehensive annual financial report

(CAFR).


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Basic Components Comprehensive

Annual Financial Report (CAFR):

CAFR to report its financial position at the end of

an accounting period and to demonstrate that it

has complied with the provisions of the law andregulations.

The CAFR includes at least two sets of financial

statements, along with their notes and anyadditional data that may be considered necessary.

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Basic Components Comprehensive

Annual Financial Report (CAFR):They are:

Internal control statement

Audit committee report

Auditor's report on the financial statements

Balance sheet

Statement of retained earnings

Income statement

Cash flow statement

Notes to the financial statements

Accounting policies

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Tips for Reading an Annual Report

1. Chairman of the Board LetterThe letter should cover changing conditions, goals to achieve or

achieved or missed, actions taken or not to be taken. Is it well

written? Reading between the lines - what is being apologized for?

2. Sales and Marketing

Should cover what the company sells, how, where, and when. Is it clearwhere the company makes most of its money presently? Is it

understandable? Is the scope of lines, divisions, and operations

clear?

3. 10 Year Summary of Financial FiguresIs this included? What's the growth of profits and operating income?

4. ManagementDiscussion and Analysis

Is there a clear discussion of significant financial trends over the past

two years? How candid and accurate is it?

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5. CPA OpinionL

etterThis letter is written by the CPA firm as an opinion on the company's

financials. The important thing to look for here is what the

qualifications are.

6. Financial Statements

Check sales, profits, R&D spending, inventory, and debt levels overtime. Read the footnotes to ferret out other information.

7. Subsidiaries, Brands and Addresses

Where is the head-quarter? Is it clear what lines, and brand names the

company has and what the overseas distribution network is?

8. List ofDirectors and Officers

How many outside vs. inside directors? Are the directors well known

and respected? Are there less than 5 or more than 12 directors?

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9. Stock Price History

General trend of price over time: up or down?

Which exchange is the company traded/listed?

Stock symbol?

Bonus/dividend history?

Some other things to consider about the report in general.

Is the report well written, clear, concise, and succinct?

Are photos modeled or live? How well do they relate to the text of

the report?

How much discussion is there of competition? How clear are

product plans?

Could the report be made more interesting, understandable, or

eye- appealing?

How does it compare with others in the same industry? and,

Be careful, not all Annual Reports are what they appear.

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Conclusion

Good corporate reporting should provide:

sufficient information in quality and quantity to satisfyreasonable expectations of the stakeholders.

rationale to monitor and guide the reporting practices of

companies through the statutory and regulatory

requirements.

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PP for Chapter 5 - Annual Report

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Transcript of PP for Chapter 5 - Annual Report