What is Annual Report

Looking into the annual report preparation.

annual-report-estoniaWithin six months after the end of the financial year, each company registered in Estonia shall submit an annual report to the Commercial Register. Annual reports are intended to give shareholders and other interested people information about the company’s activities and finances. The annual report shall be drawn up in Estonian and Estonia’s official currency (Euro).

Annual reporting is mandatory for all companies registered in Estonia, even for companies with no activities during the financial year. A company shall submit the annual report within six months after the end of the company’s financial year. Thus, if your financial year ends on December 31, you must submit the report no later than June 30 of the next year.

You should complete all accounting procedures before drawing up the annual report.

The annual report’s mandatory components include the management report on the company’s activities, the balance sheet, the company’s profit and loss statement, and the company’s capital statement.

STAGES OF PREPARATION OF THE AN ANNUAL REPORT

  1. Preparation of annual accounts
  2. Preparation of a report on the activities of the enterprise
  3. Approval of the annual report

WHAT TO INCLUDE

Filing of the annual report includes the following steps:

  • Drawing up a proposal for the distribution of profits or coverage of losses for the financial year
  • Submission of an annual report for approval

The annual financial statements must contain up-to-date and truthful information about the financial situation, financial results, and cash flows of the accounting organisation. The annual report consists of the main reports (balance sheet, profit and loss statement, cash flow statement and statement of changes in equity) and annexes.

What must be included in the report depending on the company scale:

  • Micro-enterprise

According to the Accounting Law, micro-and small-scale enterprises can prepare an abridged annual report consisting of at least two main reports – a balance sheet and a profit statement as well as up to 3 annexes. The micro-enterprise can (optionally) prepare an abridged or full annual report. Therefore, a micro-enterprise that uses the abridged annual report option is not required to prepare a management report.

  • Small-scale business

The abridged annual report of a small-scale company is drawn up in accordance with the Estonian financial reporting standard. It consists of two main reports: a detailed balance sheet and an income statement as well as up to 9 annexes. The small business also undertakes to prepare a management report.

  • Medium-sized and large enterprise

The annual report is drawn up either in accordance with the requirements of the Estonian financial reporting standard or in accordance with the requirements of the International Financial Reporting Standards (IFRS): a management report, 4 main reports, and an average of 15 annexes. A full annual report is required for medium-sized and large companies as well as non-profit associations and foundations.

COMPONENTS OF THE ANNUAL REPORT

1. Balance sheet and income statement

The balance sheet reflects the financial situation (assets, liabilities, and capital) of the accounting entity at the end of the financial year. The income statement is a statement of income and expenses and reflects the economic results for the reporting period.

2. Statement of cash flow

This report reflects the cash flow for the reporting period (receipts and payments of cash). The indication of receipts and payments for the reporting period occurs by grouping them in accordance with their purpose for financialinvestment, and commercial activities.

3. Statement of changes in share capital

This report reflects changes in the equity of the company during the reporting period. The financial statements include contributions to the share capital and distributions to owners, profit or loss, the effect of changes in accounting policies, increases and decreases in provisions, and other transactions that impact entries in equity.

4. Attachments

The number of attachments to the annual report depends on the specifics of the company, but you should definitely include:

  • Specification of the financial reporting standard, on the basis of which the annual accounting report was prepared
  • The accounting policy used in preparing the annual report
  • Clarification of material items of the main reports and their changes during the reporting period
  • Other significant circumstances related to the entity’s financial situation, performance, and cash flows

LKS Consult OÜ provides assistance in drawing up an annual report for non-operating companies and preparing an annual report for operating companies, as well as other accounting services.

You can find more information and book your consultation here.