Most analysts spend forty hours on an earnings call and ten minutes on the annual report. This is exactly backwards. The earnings call is management's script. The annual report is a legal document — the notes, the auditor's report, the related-party transactions — and it is where the honest information lives.
The 23-point checklist
Before you open page one: Check the auditor. Check the auditor tenure. Check the auditor's remuneration versus prior year.
Front-of-report signals: Chairman's letter length. CEO's compensation trend. Management commentary tone (compare year-on-year).
Financial statements: Revenue recognition policy changes. Depreciation policy changes. Working capital days by component. Contingent liabilities. Related party transactions total and trend.
Notes: Employee stock options schedule. Deferred tax assets and their maturity profile. Segment reporting reconciliation. Foreign exchange gain/loss classification.