Annual report
What an annual report is, what goes in it, and who uses it, explained simply for small businesses.
Published Friday 24 July 2026
Table of contents
Key takeaways
- An annual report sums up a company's operations and financial performance over the past 12 months
- It usually includes a letter to shareholders, an auditor's report, and detailed financial statements
- Shareholders, investors, employees, and the wider community use it to judge how a business is performing
- A small business's report is far simpler than one from a large public company
What is an annual report?
Most businesses take stock of their year at some point. An annual report is the document that captures it.
An annual report is a yearly document that summarises a company's operations and financial performance over the preceding 12 months. It's of particular interest to shareholders and potential investors who want to understand how the business is tracking.
Public companies produce annual reports for share-market regulators and their shareholders. Non-public companies aren't always required to do the same, though many still report to government regulators and tax offices. You can think of it as the yearly companion to your ongoing financial reporting.
What goes in an annual report?
The contents change with the size and type of company. A larger report paints a full picture of the year and where the business is headed.
A bigger report covers the year's highlights and performance, future goals, and a letter to shareholders from the CEO or company president. It also includes an auditor's report and detailed financial statements. A small business's report is usually much simpler.
The financial statements do most of the heavy lifting. Made up of the balance sheet, profit and loss statement, and cash flow statement, they reveal:
- current financial state
- profit or loss from the previous fiscal year
- cash available to pay debts as they come due
- earnings retained to grow operations
- operating ratio (OR), the ratio of operational expenses to revenue
For a closer look at how these documents fit together, read our guide to financial statements.
Who uses an annual report?
An annual report isn't just for the people who run the company. Several groups rely on it to form a view of the business.
Shareholders, potential investors, employees, and sometimes the wider community use annual reports to judge how a business is performing. Each group reads the same figures with a slightly different question in mind.
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FAQs on annual reports
Here are answers to some frequently asked questions about annual reports.
Is an annual report the same as a set of financial statements?
No. Financial statements are one part of an annual report, which also includes narrative sections such as the shareholder letter and a review of the year.
Do private companies have to produce an annual report?
It depends on where you operate and the rules that apply to your company. Many private companies still prepare one to keep owners and lenders informed, even when it isn't strictly required.
How often is an annual report produced?
As the name suggests, once a year, covering the company's most recent financial year. Some companies also publish shorter updates each quarter or half-year.
Who audits an annual report?
An independent auditor reviews the financial statements and gives an opinion on whether they're accurate and fair. Smaller companies may not need an audit at all.
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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.