The financial statements are a report that is developed and published by company management to show creditors, banks, partners and investors the company's performance and financial data. It is one of the basic tasks of all financial accounting. This report enables investors and creditors to learn all about the profitability and assets of the company, and to familiarize themselves with other relevant information that may indicate the company's ability to invest or borrow.

Degree of complexity of the annual financial statements

Preparing annual financial statements can be straightforward and simple, but at the same time it can be a major challenge for many inexperienced accountants. The degree of complexity of the preparation of the annual financial statements depends mainly on:

For Trading Companies:

• Number of transactions throughout the fiscal period;
• Number of suppliers and clients of the company;
• Complexity and volume of the accounting documents supporting transactions (i.e., agreements, incoming and outgoing invoices, transportation documents, CMRs, export declarations, etc.);
• Number of employees;
• Volume of fixed assets, loans, interests, taxes and other factors.

For Holding Companies:

• Number of subsidiary companies;
• Volume of dividends distributed from the subsidiary companies;
• Number of employees;
• Volume of fixed assets, loans, interests, taxes and other factors.

Preparation of the annual financial statements

Preparing annual financial statements can be both a simple and a complicated task. It all depends on the size of your company and the number of monthly transactions. There are annual financial statements that require footnotes to be given. On the other hand, there are financial statements that are presented without footnotes.

The statements can have different purposes. For example, your bank will usually be happy to see some basic financial metrics to make sure your business is ready to pay off debts. The financial statements or report is usually prepared by translating account test balances into a number of templates appropriate for a particular country's accounting laws.

Specific requirements for annual financial statements in different legal systems

Today, most annual financial statements are prepared in full accordance with generally accepted accounting principles (GAAP). However, you should always consider the specific requirements for the jurisdiction you choose. For example:

The fiscal year. In the vast majority of countries (especially EU member states) the fiscal year ends on December 31st. Other jurisdictions may have different approaches as the fiscal year can end in different time periods depending on the company's registration date, e.g. B. (in Singapore, UK, Hong Kong and others);

Deadlines for filing annual reports. Depending on the jurisdiction, the timeframe for submitting the annual report can vary from a few months to a year: 3 months in Bulgaria and Singapore; 4 months in Latvia, up to 12 months in Cyprus or up to 8 months in the UK;

Exam requirements. Note that in some countries, every company is required to provide an audited report (Cyprus, Singapore, Hong Kong, Ireland). In other countries, companies can voluntarily or, if they meet certain criteria, prepare an audited report (read more about Audit).