The annual report is still alive -- Check it out!

by Mike Guillaume
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Globalization of markets, round-the-clock cross-border investment flows, internationalization of reporting standards, the increased complexity of reporting requirements have resulted in an overall improvement of reporting practices (a good aspect) and a larger degree of homogenization of annual reports (not always for the better) over the last decade. In addition, the Net and mobile communication tools have opened new channels to reach anyone anyplace at any time (with pros and cons, once again).
Mixed together, those trends make the reporting challenge more daunting, report makers' job more difficult, and evaluation or comparison more complicated. So much that since the launch of the Annual Report on Annual Reports we have heard regularly obituaries about the extinction of annual reports (see e.g. "The death of the annual report" by David Robinson, a professor at the Haas School of Business, in October 2007). More than fifty years since the creation of annual reports (probably pioneered by IBM), and seventeen years after our first survey, the annual report is still alive –with and without changes. How come?

  • Publishing an annual report is mandatory. This probably explains why thousands of companies just stick to a legal format and simply go for reporting as a necessary evil or as (accounting) business as usual.
  • If reporting annually is primarily done to meet legal and regulatory obligations, good reporting tends to depart from ready-to-wear forms and goes beyond compliance. As the then CEO of Canadian BMO bank once wrote in his annual report message: "Reporting is not just about complying." If only more report makers could walk that talk! A big frustration indeed is that too many reports now tend to look and sound like each other (a downside of globalization). Where is that differentiation, trumpeted by branding, advertising and other marketing specialists?
  • The annual report remains (one of) the major place(s) to set out the company strategy, put it in perspective, check its execution –and problems faced. A recent survey conducted among buy-side investors worldwide by U.S.-based Rivel Research showed the clarity of business strategy and growth potential as the two major aspects considered for long-term investment. Where else can it be better explained than in an annual report?
  • The average report reader (shareholder, investor, analyst, stakeholder...) spends indisputably less time reading annuals than in the past (some alarming reports talk about five minutes!). The report lifecycle is also probably shorter than it was (like for many things today). This doesn't make annuals irrelevant, but certainly implies making them more engaging and compelling, and even sometimes building and structuring them differently towards a better and quicker use.
  • Annual reports have become more oriented towards broader stakeholder audiences than towards shareholders and stock investors only. That has increased readership. According to some recent surveys, one third of investment decisions are based on non-financial attributes. In the last decade, companies producing sustainability or responsibility reports have increased fifteenfold. Balanced scorecard, triple bottom line and integrated reports are no longer exceptions.
  • "A report created annually that provides an analysis and assessment of the trends of the past year" is the neutral and traditional definition provided by an online accounting website. Today's reporting should also look forward. Still, too many reports "do not reveal about how companies (will) create value over the long-term," as Paul Druckman of the International Integrated Reporting Council recently pointed out. "Most annual reports actually say very little about how companies and corporate executives plan to get from point A to point B, or give other information required to gauge future performance," says Shelley Taylor, a reporting expert.
  • Reporting is increasingly happening online (and going mobile too), with many annuals reaching their audience via special online versions or websites. Things have moved so fast that the web format has almost turned commonplace in some areas. Is the medium the message? Not completely, and hopefully. Online is a channel, like prints still are. It serves as a vehicle for contents, which shouldn't sacrifice substance to web gimmickry.

To keep up with trends and changes, and at the same time to maintain continuity, as a report assessment consultancy and ReportWatch as a rating process have tried to strike a balance between keeping old reporting standards and updating/upgrading report evaluation tools (criteria have been grouped and condensed in 2013). Not always an easy job! In the first five years of the Annual Report on Annual Reports two-thirds of top 100 reports were rated B maximum or lower on key reporting areas. This year, 60 percent of top 300 reports have been rated B+ or higher. Despite a gap between lowest marked reports and top ones almost as big as a decade ago, in the 2013 edition there is a 25-mark difference between top 10 annuals and the ones ranked around 200-250. That is much, or a little, depending on the viewpoint. That probably also explains why there is a tie for the number one rank (among many ties -invisible, as marks are not public- in our scoring table), between two annuals picked for various reasons.

In its seventeenth edition, the Annual Report on Annual Reports is still made for report makers and advisers who commit themselves to doing a good job, who strive for higher/highest reporting standards, who aim at bringing and adding value for shareholders, investors and other stakeholders.

Check it out!

Mike Guillaume

Mike Guillaume
Co-Founder and Editor
(Still reporting after all these years)

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Mike 4 faces's co-founder and ReportWatch kingpin Mike Guillaume wears a few hats, including financial reporting specialist and international economist, and has therefore good vantage points for monitoring companies, reports and management; as well as for watching economies and economics work (or not). Learn more about Mike's experience and expertise here. Read about Mike's work and views, including his recent book "The Seven Deadly Sins of Capitalism", on