Annual report
Learn what an annual report is, what it includes, and whether your NZ small business needs one.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- An annual report shows how a company performed over the previous 12 months, covering both its operations and its finances.
- It brings together financial statements, a letter to shareholders, management commentary, an auditor's report and governance details.
- Most small New Zealand companies don't have to produce a full public annual report, though they do file an annual return with the Companies Office.
- The annual report is the broader document, and the financial statements are one part of it.
What is an annual report?
An annual report is a detailed report that shows a company's operations and financial performance over the preceding 12 months. It's mainly of interest to shareholders and potential investors who want to understand how the business is tracking.
The report pulls the year's results into one place, so readers can see the numbers and the story behind them. It's a useful snapshot for anyone deciding whether to invest in, lend to or work with a company.
What goes in an annual report?
An annual report combines financial data with commentary that explains what happened during the year. Alongside the numbers, you'll usually find written sections that set the context and confirm the figures are reliable.
The financial core of the report is a set of financial statements, which typically include three key documents:
- a balance sheet that lists what the company owns and owes at a point in time
- a profit and loss statement that shows income and expenses over the period
- a cash flow statement that tracks money moving in and out of the business
Beyond the statements, an annual report also carries context and assurance from the people who run and check the business. These sections help you make sense of the financial reporting and understand the direction of the company. Common non-financial parts include:
- a letter to shareholders from the chief executive or chair that reflects on the year
- management commentary that explains results, risks and plans
- an auditor's report that gives an independent view on the financial statements
- governance information that sets out how the company is directed and controlled
Who uses an annual report?
An annual report is read by anyone with a stake in how a company is doing. Different readers look for different things, but they all use it to judge the health and direction of the business.
- Shareholders and potential investors use it to weigh up returns and decide whether to buy, hold or sell.
- Employees use it to gauge job security and understand where the company is heading.
- Lenders use it to assess whether the business can repay what it borrows.
- Customers use it to check that a supplier is stable enough to rely on.
Do small businesses in New Zealand need an annual report?
If you run a small company, you might wonder whether an annual report is something you have to prepare. For most small New Zealand businesses, the answer is no, though there's a related obligation worth knowing about.
According to the Companies Office, most small New Zealand companies aren't required to produce a full public annual report. Larger companies and all Financial Markets Conduct (FMC) reporting entities are the ones that must file audited annual financial statements with the Companies Office.
There's one filing that does apply to companies of all sizes, and it's easy to confuse with an annual report. New Zealand companies must file an annual return with the Companies Office, which confirms your company details and is a different thing from an annual report or your financial statements.
How to read an annual report
Reading an annual report gets easier when you take it one section at a time. Work through it in a logical order so the numbers and the commentary make sense together.
- Start with the letter to shareholders to get the leadership's view of the year.
- Read the management commentary to understand the results, risks and plans.
- Review the financial statements to see the balance sheet, profit and loss, and cash flow figures.
- Check the auditor's report to confirm an independent reviewer has signed off the numbers.
- Look at the governance information to see how the company is run.
Annual report vs financial statements
These two terms are often used as if they mean the same thing, but they don't. Knowing the difference helps you understand what you're looking at and what to ask for.
The annual report is the broader document that tells the full story of the year, including commentary, governance details and an auditor's view. Financial statements are one component of that report: the balance sheet, profit and loss statement, and cash flow statement that set out the numbers.
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FAQs on annual reports
Here are some frequently asked questions about annual reports to clear up the details that often trip people up.
Is an annual report the same as financial statements?
No, the financial statements sit inside the annual report as one part of it. The annual report also includes written commentary, governance details and an auditor's report.
Do small businesses in New Zealand have to produce an annual report?
Most small New Zealand companies aren't required to produce a full public annual report, according to the Companies Office. They still file an annual return, which simply confirms their company details.
Who prepares an annual report?
Company directors and management put the report together, often with help from an accountant or finance team. An independent auditor then reviews the financial statements where an audit is required.
Are annual reports audited?
The financial statements within larger companies' reports are audited by an independent auditor. Many small companies aren't required to have an audit, so their figures may be unaudited.
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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.