What Is an Annual Narrative Report?

First of all, what is the practice of narrative reporting? Well, it simply refers to the act of describing all the non-financial data that is contained in the published documents for the purpose of giving out a comprehensive understanding of what the company’s business is, its respective market position compared to its competitors, its plans, its performance, and its aspirations. And as stated earlier, companies that make narrative reporting a habit give themselves an advantage over their competitors since it presents a more attractive outlook of their business which can improve stakeholder business relationships.

An annual narrative report, or an annual report, refers to a business document/publication that thoroughly reports the details of a company’s operations throughout the previous year. An annual report, as the name implies, is released once a year with the primary goal of sharing information with the company’s shareholders and investors, aside from reasons connected to regulatory requirements. The contents of annual reports are a significant source of information for stakeholders. The document includes thorough information about the firm, management perspectives, and a genuine financial record, allowing investors to make educated decisions regarding future investments. Both external and internal reports may include the material of an annual narrative report.

What Should be Included in an Annual Narrative Report?

Annual narrative reports will detail a substantial amount of information regarding how the company has performed throughout the previous year, and its overall contents will vary depending on the company. With that being said, here are some of the key contents that need to be written in an annual narrative report:

Corportate Details. The narrative report’s corporate information section offers information about management officials and others involved with the firm, such as directors, creditors, auditors, and registered and corporate locations. Detailed data on the board members and their respective positions may be found here. If the company’s auditor is well-known, investors can learn more about it.Message from the CEO. The CEO’s letter is written to shareholders and offers an overview of the company’s performance during the preceding year. As the company’s success is relevant to the industry in which it works, CEOs often devote a significant amount of time to their letters in this area of the annual narrative report. Because the company shareholders are considered the primary readers of the report, the letter would most likely include material of relevance to them.Director’s Report. This section of the annual narrative report is often presented by bigger corporations at the end of each fiscal year. Small businesses or micro-entities are free from this requirement. Private corporations are required to produce a series of financial reports designated as statutory accounts, which include directors’ reports, at the conclusion of each fiscal year. The directors’ report summarizes the company’s financial situation and is often submitted by the company’s board of directors. The general goal of including a part in the annual report for the directors’ report is to increase corporate transparency.Discussion and Analysis. This is one of the most important sections of an annual report, and firms use it to demonstrate their dedication to the company’s vision and strategy. The discussion and analysis area contains all of the actions carried out by the company’s operating departments. The goal of this section in the annual narrative report is to help everyone comprehend the numbers and financial situations while also outlining critical strategic and operational decisions that can have a significant influence on the company’s future performance and position. It also takes into account the investor’s opinion of the company’s dangers.Company Shares. This section of the annual narrative report contains all of the information on the share prices. This component of the report’s objective is to give insights into the previous performance of the ownership structure, offering of shares by entrepreneurs during the year, dividing of shares, and bonus shares allocated by the company.Corporate Governance Report. The goal of this portion of the annual narrative report is to convey information about a company’s corporate governance practices. This section also includes a hierarchy of the board of directors, a relatively short general background on the company’s directors, participation of directors in board and annual general meetings, compensation of directors, re-appointment of directors after the term has expired, and the composition of sub-committees.Vision and Mission StatementThe mission and vision statements of a corporation define what the organization stands for and where it intends to go in the future. These kinds of statements in the annual narrative report are extremely valuable because they open the door to debates regarding how successfully or poorly the company is executing its goal and vision. Creating mission and vision statements using simple language and expressing the goal, regardless of the type of organization, can be a transforming process and it will surely have an impact on the business.Financial Statements. What are financial statements? Well, financial statements are referred to as written documents that give information about the company’s business activities and fundamental financial performance. Government authorities, accountants, and other financial businesses often audit the financial statements that are present in the annual narrative report to confirm the veracity of the information for tax, financing, or investment purposes.Accounting Notes. This is a component of the annual report that includes information about a company’s accounting policies, such as remarks on the method of depreciation, foreign currency losses/gains, divisional reporting, inventories, obligations, leases, and so on. It is always recommended to read annual reports because the reader will be able to comprehend intricate details such as changes in a financial year or accounting standards that can directly influence the company’s value, key operations of the company, and financial management’s perception of different economic patterns.Auditor Notes. In this portion of the annual narrative report, the company’s auditor expresses his or her thoughts and comments on the company’s financials. Additionally, the company investors may also learn about the background information of auditors, such as their names, credentials, and industry experience, by thoroughly scanning this section of the annual narrative report.Outlook. Finally, annual narrative reports often include information about the company’s future performance in order to tell shareholders about the company’s future aims and ambitions. Investors may have a complete insight into the company’s existing position in its specific sector as well as the company’s future growth goals. The reports also provide details on a company’s strategy and how it intends to execute that strategy in the following years.

Parties that Benefit or Use Annual Narrative Reports

Here are the types of parties that largely benefit from effective annual narrative reporting from the companies:

How to Create an Annual Narrative Report

An annual narrative report serves to express the established values and goals of the brand. And when effectively written and prepared, they also serve as essential parts of a company’s accountability and transparency. With that being said, here are the steps to be followed in order to create an effective annual narrative report:

  • 1. Plan Ahead

    The initial step to be performed in creating an annual narrative report and making it effective is to plan ahead on what to include in the document. Planning on creating an annual narrative report in advance is essential since it is a very long process that involves the requirement of an organized system for data gathering, data tracking, data analysis, media clipping, and gathering a database of business achievements. It is also important to consider options in creating such a report, as this can be created in-house by the company or also be outsourced to a third-party design firm.

  • 2. Identify the Key Message

    After planning on what to do in your annual narrative report and how you are going to do it, proceed to this step. In this step of creating the annual narrative report, identify the key message of the company. An annual narrative report is an excellent chance to emphasize your achievements and the effect of those achievements. Investors and workers are interested in what you did and why you did it. Businesses may establish confidence and cultivate long-lasting connections by tying their actions and successes to the end objectives and mission statement and producing a key message from it.

  • 3. Draft the Content

    After determining what the key message is in your annual narrative report, proceed to this step. This is sometimes the most challenging phase in preparing the yearly narrative report. It is critical to first draft the report’s content and format. Aside from the fundamental features, the annual narrative report must have a narrative that defines the general framework of the report and molds the information around a narrative thread. This makes it easy to detect and eliminate content that does not directly advance the narrative. In this process, keep in mind that the material of the annual report should be truthful and open. Don’t exaggerate your achievements or hide your misfortunes.

  • 4. Finalize the Content and Design

    After creating the draft of the contents of the annual narrative report, proceed to the final step, which is finalizing it and emphasizing its design. Take the draft you’ve created and incorporate it into a final designed structure. A well-designed, interesting, and professional annual narrative report may be utilized as a marketing device by a company. The reader must be able to scan throughout the document and find the information they need. You may utilize headings and subheadings to create a well-designed narrative report, keep the content short and straightforward, and highlight the crucial portions using colored text boxes, quotations, and captions.


Why is an annual narrative report important?

An annual narrative report is important because it highlights a company’s key achievements, expectations for the coming year, and overall goals and objectives. It also provides information on the company’s financial situation and informs shareholders and employees about the company’s growth strategy for the coming year. Annual narrative reports are also essential since they keep your crucial company information relevant.

What is a prevalent issue when creating annual narrative reports?

The biggest difficulty with preparing an annual narrative report for the overwhelming majority of businesses is that the process is largely tedious. To collect material, it is commonplace to employ a variety of preferred word processing programs and spreadsheet software. The spreadsheet program is usually used for numerical data, which is then copied into the word processing program needed to make the report. This is potentially dangerous, error-prone, and time-consuming.

Why is good design important in an annual narrative report?

The design of an annual narrative report is vital because if it is disorganized, the readers may not grasp all you’ve tried to say. If it’s dull and dry, investors may decide to devote their time to other things instead. Annual narrative reports are a great method to convey your business to potential consumers and staff alike. The way you display your company affects their perception of you, your beliefs, what you stand for, and all of the information you’ve provided. An engaging design of your annual narrative report gives your many readers a delightful experience and helps them leave with the main points from your annual report.

As stated earlier, annual reports serve as documents that, when effectively written, serve as an element of how transparent your company is and how accountable it can be. In this article, various examples of such documents exist for you to acquire should you need an example when you’re creating one.