How to plan your annual report process

There are significant advantages to starting the process of preparing the annual report well in advance. This benefits the optimisation of your resources, improves stakeholder management and reduces the risk of surprises when addressing specific risk areas. But how do you best plan the creation of the annual report? You can learn more about this in this article.

When preparing the annual report, many stakeholders and parts of the organisation are involved. The process includes a wide range of specialised tasks within Finance, involves other departments and potentially external advisors for communication, as well as relevant decision-makers.

A well-planned process can, therefore, be crucial for ensuring the most optimal use of resources. It provides your employees with a better framework for preparation, helps keep audit fees to a minimum, and makes internal communication to the company's stakeholders more credible.

Perhaps your company's activities, key personnel, accounting regulations and timeline remain unchanged from last year, however, we recommend that you revisit the plan and, most importantly, the lessons learned from last year.

Management is the formal issuer of the annual report, making them the key stakeholder in the Finance department's task of preparing it. Therefore, it is crucial to clarify expectations for the task as early as possible in terms of time consumption, quality and support for the CFO’s needs in managing other stakeholders (particularly the CEO and the board of directors).

The planning should also include considerations of potential impacts from more strategic matters. For example, is there a need for voluntary changes in accounting policies or presentation currency? Will a full conversion to another accounting framework (e.g., from the Danish Financial Statements Act to IFRS) be required and so forth?

The involvement of external advisers must also be coordinated early in the process, as this can have a significant impact on both timeline and resource consumption. A solid plan for collecting reporting packages from subsidiaries is also essential, as this is often an area where delays can threaten the overall timeline.

In Denmark, the annual report must be submitted to the Danish Business Authority no later than six months after the balance sheet date. For listed companies, the deadline is four months. In addition to the legislative requirements, it is important to define internal deadlines for each phase of the annual report process, from the completion of bookkeeping to the signatures of management and auditor.

Here, it is important that you create an overview of each component in the process, after which you can estimate the need for resources. To identify any gaps in the resources needed, it can be beneficial to work backwards from the desired deadlines.

You need to consider both external and internal deadlines, as otherwise you will not be able to assess how they align with each other. Furthermore, it is essential to distinguish between deadlines derived from stakeholders and deadlines derived from the parties involved in executing the actual work associated with the annual report, which will typically be finance, marketing, ESG specialists and subsidiaries. If the company is part of a larger group, the timeline may also be affected by a parent company at a higher level.

In the timeline, you can get an overview of the stakeholder deadlines you need to be aware of - both external and internal:

While the above deadlines in the timeline rarely cause challenges, the operational deadlines often prove problematic to meet. This may be due to underestimating the time aspect, where for instance the execution itself, the review and the follow-up take longer than calculated, or because the preparation of the template and general layout of the annual report should have been outsourced.

It might also be that the plan has not been detailed enough, which has led to unnecessary surprises coming in from the side. Finally, there may have been a lack of general alignment of expectations, which has thus created misunderstandings that needed to be resolved at the last minute.

Based on the breakdown of the annual report elements, responsible persons must be allocated for both execution and approval, and an estimate of time consumption must be prepared. In connection with this, a thorough alignment of expectations must be conducted with each individual person regarding what they are to perform and what output it should lead to.

It may be a good idea to start by revisiting last year's year-end closing process – unless this evaluation was conducted immediately following the previous year, which is highly recommended. This way, you can ensure that the errors from the previous year are not repeated. In practice, this is best achieved through a thorough evaluation process, where representatives from all significant parties involved in the annual report process are gathered. This does not, however, include the auditor.

The goal is to identify the elements that created delays or problems and ensure that these are handled better next time. A structured agenda for the evaluation meeting can be beneficial to ensure that all necessary topics are discussed.

The Danish Financial Statements Act regulates all commercial enterprises and is structured around a so-called 'building block model' that defines which rules a company is subject to regarding financial reporting depending on its size, which is divided into four accounting classes: A, B, C or D. The accounting class you belong to depends on certain statutory size thresholds related to net revenue, balance sheet total and average number of employees.

The key point here is that you need to consider whether you are exposed to a change in accounting class compared to last year, including considering whether there have been changes in legislation. It is important to note that the size thresholds for all accounting classes were increased by approximately 25% effective for annual financial statements approved after June 1 2024. In practice, this means that the changes take effect from the 2024 annual report onwards.

If you report under IFRS (voluntarily or as required), it is important to be aware that you are also subject to compliance with the IFRS Executive Order, which contains supplementary disclosure provisions.

The requirements for the management report depend on your company's accounting class. The Danish Financial Statements Act's provisions also apply if you report under IFRS, as IFRS does not require a management report as a separate part of the annual report.

The current disclosure requirements mainly focus on describing the company's principal activities, the year's development compared to last year, and expectations for the coming year. These requirements are considered relatively uncomplicated for many enterprises and resemble a summary of internal reporting. However, it is essential to address the corporate social responsibility requirements well in advance. These include your company's environmental position, including efforts to reduce climate impact, as well as social conditions, working conditions, human rights, and anti-corruption and anti-bribery measures. Central to this is how you integrate corporate social responsibility into your business strategy, whether you have a policy for corporate social responsibility, and how this translates into concrete actions.

It is particularly important to be prepared for the future corporate social responsibility requirements, as the current rules will be replaced by more comprehensive and complex requirements in the EU Corporate Sustainability Reporting Directive (CSRD) by January 2026. The CSRD establishes the framework for sustainability reporting, while the associated European Sustainability Reporting Standards (ESRS) specify the disclosure requirements. Not only may your company become subject to and need to address these requirements, but sustainability reporting will also be a focus area for suppliers, customers, and other stakeholders. Therefore, it may be worth considering voluntary reporting of the future requirements - in whole or in part - as part of your strategic preparation.

It is important to estimate the necessary resource requirements as early as possible in order to identify where additional resources should be added in the company.

By planning earlier in the year, you can create a smoother process for the year-end closing. The timeline often breaks down not due to lack of resources for the planned tasks, but because of unforeseen challenges, where unresolved risk areas prove time-consuming to address professionally, and especially where the effects of such issues need to be clarified with stakeholders. An effective solution can be a hard close audit that identifies and addresses critical risk areas and significant accounting estimates well in advance, creating optimal conditions for an efficient year-end closing and annual reporting.