A management report is a document that contains a detailed compilation of data on the evolution of a company in the previous year. It includes the management and events that have occurred during the year that have led the company to its current situation, as well as the actions to be implemented and the risks foreseen for the future.
Listed companies or companies that cannot prepare their balance sheet and abbreviated equity statement, have the obligation to prepare and file this report in the Mercantile Registry. Generally, along with the company's annual accounts. These are usually large companies, generally listed.
What is the mandatory management report for?
The management report puts in context the current situation of a company through the description of the actions carried out by its management during the year and anticipates the actions that will materialize in the future.
Thus, it reveals really valuable information to your reader. Since it helps you to have an extensive vision about a company and form an opinion that supports your future investment decisions.
It is usually very useful for financial analysts, credit institutions, suppliers and creditors, customers, employees, regulators and the public in general. They use the information contained in the report to make investment decisions, evaluate the ability to pay dividends, meet their debt obligations on date or meet the benefits agreed with the employees after their active period.
The management report largely complements the information in the financial statements and, specifically, in the annual report. Sheds light on more qualitative aspects, as well as quantitative ones. It includes the operational, investment and financing strategy and the future perspectives of the company in relation to the proposed objectives.
Management report content
The management report must include the following points:
- Situation of the entity: With its organizational structure and its operation.
- Business performance and results: Comprehensive analysis of business results and current situation, in economic and financial terms, including the company's strategy aimed at achieving the objectives proposed for that year. The main financial and non-financial KPIs that describe the achievement or not of said objectives should be included.
- State of liquidity and capital resources: Together with the obligations maintained with other agents, such as creditors and clients.
- Main risks and uncertainties: Including financial and operational ones.
- Important events that occurred during the year and after the end of the year.
- Information on the foreseeable evolution of the entity.
- R + D + I activities: Develops quantitative and qualitative details.
- Acquisition and sale of own shares: Including the total value of the securities that are in the hands of the company.
- Other relevant information: Such as stock information, dividend policy and rating or credit rating.
Who is obliged to submit the management report?
The companies that formulate an abbreviated balance sheet and statement of changes in equity will not be required to prepare the management report. SMEs and micro SMEs, for example, are exempt.
But, in addition, those companies that meet at least two of the following circumstances will also enter this group:
- That the total of the asset items does not exceed four million euros, reflected in the balance sheet.
- That the net amount of its annual turnover does not exceed eight million euros.
- That the average number of workers employed during the year does not exceed 50.
Although it is true that the above will depend on the geographical area and the regulator on which each company depends.