Annual report
Learn what an annual report is, what goes in one, and how it differs from a Canadian annual return.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- An annual report is a yearly summary of a company’s financial performance and activities, built around its core financial statements.
- A full report can include highlights, a letter to shareholders, management discussion and analysis, an auditor’s report, and notes, though a small business version is usually much simpler.
- In Canada, an annual report isn’t the same as the annual return you file with Corporations Canada or a provincial registry to stay in good standing.
- Investors, lenders, employees, suppliers, regulators, and you as the owner all use an annual report to understand how the business is doing.
What is an annual report?
An annual report is a document that sums up a company’s financial performance and activities over the past year. It brings the numbers and the story of the business together in one place.
Public companies produce annual reports because regulators and shareholders require them, and the reports are shared widely. Non-public companies, including many small businesses, often prepare a simpler version for their own records, their lenders, or their tax office, even when a formal report isn’t legally required.
What goes in an annual report?
At its heart, an annual report is built around a set of financial statements that show where the money came from and where it went. The three main statements each answer a different question about your business.
- Balance sheet: shows what you own and what you owe at a single point in time, so you can see the net worth of the business
- Income statement: shows your revenue, costs, and profit or loss over the year, so you can see whether the business made money
- Cash flow statement: shows the cash moving in and out of the business, so you can see whether you can cover your bills
A larger report wraps those statements in extra context that explains the results. These are the components you’ll often find alongside the numbers.
- Highlights: a short snapshot of the year’s key figures and achievements
- Letter to shareholders: a message from the chief executive officer (CEO) that frames the year and the direction ahead
- Management discussion and analysis (MD&A): management’s plain-language read on the results, risks, and outlook
- Auditor’s report: an independent auditor’s opinion on whether the financial statements are fair and accurate
- Notes to the financial statements: the detail and assumptions behind the numbers in the statements
A small business’s annual report is usually much simpler. You might just pull together your income statement, balance sheet, and cash flow statement, with a few notes to explain anything unusual.
Annual report vs annual return in Canada
These two terms sound alike, but they’re different things. It helps to know which one someone means when they ask you for it.
An annual report is the financial and shareholder document described above: it tells the story of how the business performed. An annual return is a separate filing that a corporation submits to Corporations Canada or a provincial registry to confirm its basic details and keep the company in good standing. Filing thresholds, timing, and any fees vary by jurisdiction, so it’s worth checking the requirements that apply to your corporation.
Who uses an annual report?
An annual report gives different readers a clear view of the same business. Each group looks at it for its own reasons.
- Investors use it to judge whether the business is a sound place to put their money
- Lenders use it to decide whether to offer credit and on what terms
- Employees use it to understand the health and direction of the company they work for
- Suppliers use it to gauge whether the business can pay its bills reliably
- Regulators use it to check that the company is meeting its reporting obligations
- Business owners use it to track performance and plan the year ahead
Do small businesses need an annual report?
Whether you need a formal annual report depends on how your business is set up. The requirements are different for private and public companies.
Public companies must produce detailed annual reports for regulators and shareholders. If you run a private small business, your reporting is usually much simpler, and a full formal report often isn’t required. Even so, keeping a clear yearly summary of your financial reporting helps you apply for funding, work with your accountant, and keep your corporation in good standing.
How to read an annual report
Reading an annual report gets easier when you work through it in order rather than diving straight into the numbers. These steps help you build a picture from the top down.
- Start with the highlights and the letter to shareholders to get the big picture and the CEO’s view of the year
- Check the financial statements, and if you want a refresher, see how to read financial statements
- Read the auditor’s report to see whether an independent auditor signed off on the numbers
- Review the management discussion and analysis to understand the risks and the outlook ahead
Keep on top of your numbers with Xero
Pulling together an annual report is far quicker when your financial statements are always up to date. Accounting software brings your balance sheet, income statement, and cash flow statement into one place, so the numbers are ready when you need to report on the year. Sign up today and get one month free.
FAQs on annual reports
Here are some frequently asked questions about annual reports to help you understand what they cover and who they’re for.
How often is an annual report produced?
An annual report is produced once a year, usually covering the company’s financial year. Some businesses also share shorter updates in between, such as quarterly figures.
Who prepares an annual report?
Management and the finance team usually prepare the report, often with input from an accountant. For larger companies, an independent auditor reviews the financial statements before the report is finalized.
Is an annual report the same as a tax return?
No, they serve different purposes. A tax return calculates what you owe the tax office, while an annual report summarizes the year’s performance for a wider group of readers.
Are annual reports public?
Public companies must make their annual reports available to shareholders and regulators. A private small business can keep its report private and share it only with people such as lenders or investors.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.