A mandated section in the annual report is the Management Discussion and Analysis (MD&A). It is a direct message from the company’s management to all its shareholders. Over time, it has become a significant portion of the report, specifically for retail investors, as it helps present a bird’s eye view of the company’s overall functioning.
Although this section is a legal requirement, it is not a section that is audited by the Company’s auditors. This is because it contains the management’s opinion on how the company has performed in the previous financial year in relation to its industry performance, and how it has worked to overcome the obstacles thrown its way. It also lays down the goals that the management intends for the company to achieve in the near future and the methodology it seeks to follow.
The three main objectives, related to financial reporting, that the legal authorities had in mind when mandating this section in the annual report were:
Intending to draw in rational comments from the management of organizations, the authorities have evolved this section of the report to function as a window into the leading minds of companies. This has meant that annual reports no longer just state the numbers, they present the management’s train of thought behind the company’s performance. It also encourages a pragmatic account of the company’s operations by insisting that the management present a true and fair view of both the positive and negative aspects.
The MD&A is transforming itself into a mechanism that enhances transparency and enables easy dissemination of information from the management to the community of stakeholders. A well-written MD&A in an annual report can provide meaningful information and help investors better analyze companies and make informed decisions on the mobilization of their capital. A company whose MD&A is better than others will gain an edge as it will be perceived as one that engages in good corporate governance practices and maintains a healthy relationship with all its stakeholders.
Writing an MD&A section in your annual report that uniquely represents your company and transparently displays data with a convincing narrative is not an easy task. This requires expertise on multiple levels, including an in-depth understanding of the company and the industry which is then translated through compelling content, all the while ensuring easy readability.
For this reason, many companies look to specialized business report design agencies to help get their message across and one such agency is Report Yak, which has years of experience helping companies convey their stakeholder engagement results to all readers. Check out some of our work and feel free to get in touch to discuss your next annual report.
Annual reportsImpact Reports +3
Annual reportshalf-yearly reporting +2
8 content elementsannual reporting +3
annual reportingAnnual reports +2