Executive Summary
Annual reports communicate the performance of the company and bring out any important information that could influence future performance.
The company annual report is a requirement for public companies and serves as a tool that investors use to evaluate the suitability of a company under various investment themes.
The Australian Securities Exchange (ASX) is a limited company that manages the Australian stock market to provide companies with an avenue for trading their shares.
The ASX annual report has the chair’s letter, the description of the business, and the financial statements of the company in a narrative and graphic form.
Introduction
Annual reports provide an integrative way of concisely communicating the organization’s strategy, governance, performance, and prospects (Stittle 2003). While on one part, the annual report highlights the company’s performance in a stand-alone manner, it also displays available prospects for bringing value in the short, medium, and long-term. The annual report also provides a chance for bringing out the company’s persona and vision. It tells the unfolding story in one regularly updated document. In addition to the present potential of annual reports, they can become effective communication vehicles that companies use to relate to their shareholders and other stakeholders. At the same time, annual reports can also incorporate themes that allow them to intrigue readers (Stittle 2003). Consequently, when done correctly with the appropriate theme, the annual report also serves as a potent marketing tool for a company (Goldstein 2005).
Definition of the ASX
ASX is the acronym for the Australian Securities Exchange (ASX Limited 2013). It is a leading financial market in the world that allows traders and investors to utilize a myriad of services, such as listing, trading, clearing, and settlement. The exchange is essentially a marketplace that hosts various companies dealing with resources, finances, and technology. Through the ASX, companies are able to build wealth for the future. They can also manage their investments and other attributes about the effective operation of companies. For example, firms can manage their operating risk and get additional capital to fund their growth. The annual report is a requirement for companies listing on the ASX, and it allows investors to tell the way the company has been doing in the past year.
Stages of an annual report
An annual report contains financial statements of the firm, which form the basis of the financial analysis carried out by brokers, interested investors, and any other person interested in examining past, present, and future performance of the company. The report includes messages about the company. These messages come from the management team, including the director and the board. It also includes the profit or loss declaration and a narrative summary of the previous years and present year’s performance. In some cases, the report will also inform readers about detailed prospects of the company in the coming years.
Causes of the annual report
Companies must release the information that could have an effect on the share price as a way of ensuring that investors have adequate capabilities to make informed decisions.
Managing the ASX
The ASX annual report contains financial highlights, a letter from the chair, a report from the managing director, business highlights, and a narrative about the regulatory oversight of Australia’s financial markets. In addition, it also has sections about regulatory development, environment, social and corporate governance overview, environment, social, corporate governance, key financial ratios, and transaction levels and statistics (ASX Limited 2013).
Chair’s letter
The chair’s letter, which forms the first part of the annual report, summarises the company’s intentions towards shareholders. It explains, in brief, all the activities and decisions that the company is undertaking or will be undertaking in the near future. The letter also brings out the decisions of the board and, therefore, serves as a window for shareholders and interested persons to have a glimpse of the board’s intentions. It is easy to highlight the theme of the annual report by reading the chair’s letter. As Goldstein (2005) explained, the theme closely aligns with the company’s vision and the concerns of powerful stakeholders, such as customers and shareholders.
CEO report
After the chair’s letter, there is the CEO report, which provides accurate figures concerning performance and company direction, as well as value creation and accountability (Busco et al. 2013). It summarises incomes and expenditures and explains the profit position of the ASX. After highlighting key figures that are also contained in the income statements, such as cash market revenue, information services revenue, technical services revenue, derivatives, and over-the-counter (OTC) revenue and ‘Austria clear’ revenue, the report goes on to provide a near-future outlook.
Company services sections
There is a brief on the mission and service chatter of the ASX. In addition, the annual report also has graphical representations of listings and issuer services (these are the main products of the ASX). A second graphical report highlights the cash market outlook and the value of the ASX. Similarly, there is a graphical report on information and technology services within the annual report. Each of the graphical reports has a brief narrative on services rendered by the ASX, the performance of the year that just ended, and the focus areas under the respective title of the graphical report. In addition to the above reports, there are two more graphical representations of the derivative and OTC markets and Austria clear.
The other components of the annual report of ASX highlighted previously, such as the social components of the company, are all presented in a narrative form. However, they include charts in some cases to provide an easy way to interpret figures and other features of the subject under discussion (Hrasky & Smith 2008).
Conclusions
The annual report is an important document for managing the relationship of the company leadership and management with that of shareholders and other stakeholders. The report acts as a communication and marketing tool for the company to explain its position, its intentions, and its performance. Organizations face individual circumstances, thus they will have different contents of the annual report. However, each organization will always highlight key components that are universal. The components include letters or reports for top management and the board. Reports also explain the business of the company underperformance and outlook. Another important feature of annual reports as highlighted by the review of the ASX annual report is their use of graphical representation to make it easy to interpret.
Recommendations
- ASX should continue using the annual report to communicate with relevant stakeholders about its services.
- The use of graphic components, together with narratives about the company is a welcome addition to the annual report, and it should persist because they improve its readability.
- The length of the report by ASK is also sufficient because it includes enough detail to make the report serve as a marketing tool for ASX Limited.
List of References
ASX Limited 2013, ASX annual report 2013, Australian Securities Exchange Limited, Sydney.
Busco, C, Frigo, ML, Quattrone, P, & Riccaboni, A 2013, ‘Redifining corporate accountability through integrated reporting’, Strategic Finance, August. pp. 33-41.
Goldstein, SZ 2005, ‘Unleashing the power of the annual report at DTCC. Strategic Communication Management, vol. 9, no. 3, p. 30.
Hrasky, S, & Smith, B 2008, ‘Concise corporate reporting: communication or symbolism?’, Corporate Communications: An International Journal, vol. 13, no. 4, pp. 418-32.
Stittle, J 2003, Annual Reports: Delivering your corporate message to stakeholders, Gower Publishing Company, Burlington.