The annual report is a collection of a firm’s financial statements and other financial information, published yearly. All firms whose stocks are publicly traded are required by the Securities and Exchange Commission (SEC) to publish annual reports. Annual reports are attractive, well-designed booklets of financial data about a firm. Among the financial statements normally included are income statements for the current year and preceding year(s), balance sheet for the current year and preceding year(s), and cash-flow statements, all in accordance with generally accepted accounting principles (GAAP). Written reports from the board of directors and key management personnel are always an integral part of the annual report. When the report is distributed within a short time before the stockholders’ annual meeting, it also includes election, voting, and proxy information for the stockholders.
While annual reports are mailed to each stockholder within a firm, the annual report is also very useful to firms, individuals, creditors, and organizations outside of the firm being reported. Because of the SEC requirement that the financial statements be constructed and reported in accordance with GAAP, the comparison of financial statements among firms is possible when they all measure, record, and report accounting data in the same fashion and according to the same rules.