It’s the most wonderful time of the year if you’re a shareholder of a publicly listed company… Following the end of the financial year, businesses big and not-so-big publicly disclose the details of their financial performance and outline their plans for the future. It’s called reporting season and it’s a big generator of business news stories in August, so in this Squiz Shortcut, we’ll get across what it’s all about and why it matters.

Set the scene for me…
So when we say listed companies, we’re talking about businesses that are on the Australian Stock Exchange – the ASX – or any of the many other stock exchanges in the world.

So public companies?
You got it. They’re businesses where anyone can buy shares on the business via an exchange. And that’s different to private companies which have different ownership structures – it’s a much more closed arrangement.

Why do companies go public?
You generally list a business on a stock exchange to raise funds and so that those who own the business can cash in, among many other reasons.

And aren’t there a lot of rules that come with that?
Yep – so while private companies still have reporting requirements as regulated by the Australian Securities and Investments Commission (ASIC), public companies have more disclosure and reporting obligations from both ASIC and also the stock exchange.

Why so many rules?
One reason is so that it lets shareholders know what’s going on. They have a legal right to know what’s happening inside the company so they can make informed decisions about their investments. It’s also about the broader health of the stock market more generally – the guiding rule about the markets is that it works on confidence.

Because mistrust can be catastrophic for businesses…
That’s right, and transparency is important to foster confidence. Reporting on results at regular intervals throughout the year is one way companies share information with their shareholders and the public.

And this year’s reporting season has officially started?
Yep, August marks the start of the time when companies listed on the ASX report their end of financial year results.

Didn’t the financial year end in June?
It did – but it takes a few weeks for the dust to settle and the numbers to be checked. Many of these companies are big, complex machines and some of them have international operations, so it takes a bit of time for the full picture to be formed with the absolute accuracy required by the regulators.

So all the ASX-listed companies are reporting this month?
Not quite. Westpac, ANZ and the National Australia Bank all end their financial year on 30 September and report their results in October and November. They’re allowed to align with the US fiscal calendar because of their international investor bases – they just have to be clear on what their reportable period is.

What about the other banks?
Some, like the Commonwealth Bank – which was a government business once upon a time – picked the Aussie calendar for reporting.

And what are the other earnings updates throughout the year?
There’s one earnings announcement in February at the halfway mark of the financial year, and some companies also have trading updates after each quarter.

What’s the difference between an earning announcement and a trading update?
A trading update is essentially an update on your sales. That’s particularly important for investors in retail companies, or mining companies for example – any company whose performance is influenced by the market. But the reporting season is all about earnings. And earnings means what profit – or loss – you made.

What kind of info do companies share?
Things like their revenue, their costs, their investments, their taxation arrangements, and the remuneration of their staff, particularly key employees like the CEO. All of that and more goes into giving investors the full picture about their year, or their half year in the February earnings update.

And some of that requires a lot of explaining…
Yep, and these results give companies an opportunity to talk about their strategy but also be transparent about success and failure. So for a mining company, that might be about the development of new mines. Or for a software company, about new products and their uptake.

How is this info shared?
So the companies submit it all via the ASX and ASIC – and it’s on the company websites and sent directly to shareholders in the mail or via email.

Any other significant annual company events to note?
There’s the annual general meeting, or the AGM. Those happen in November and it’s essentially a shareholder meeting fronted by the board and executives of the company. Shareholders use the information in these earnings results to grill them about their decisions and their performance.

If I’m not a shareholder, why should I care about any of this?
That’s fair enough, but if you have superannuation, you have a financial interest in the health of Australia’s listed companies, particularly our biggest ones. The super funds are some of the biggest investors in the Aussie stock market, so while you might not have those shares in your name, you benefit – or pay for – the ups and downs of the stock market.

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