The entrepreneur has to close and evaluate each financial year; this is what the annual financial statements serve. This is mandatory for all companies that are required to keep double-entry bookkeeping. Legal regulations apply to the annual financial statements. The economic success of a company can be seen from the result.
Definition of the annual financial statements
According to bittranslators, the annual financial statements are the arithmetical closing of a commercial business year . It represents the economic success and financial situation of a company and is the conclusion of the bookkeeping. The annual financial statements compile accounting documents that are checked, confirmed and published. In the case of companies that are required to keep double-entry bookkeeping , the balance sheet, profit and loss account and possibly an appendix and a management report are the main components of the annual financial statements.
Small companies that are not required to keep double-entry bookkeeping only need to prepare an income and surplus account for their annual financial statements . This is the basis for future planning and decisions in the company; outsiders can view the company’s financial situation via the annual financial statements. The annual financial statements are also the basis of the company’s taxation.
Regulations for the annual financial statements
Certain regulations apply to the annual financial statements. In it all must
- Prepaid expenses
to be expelled. It must comply with the principles of proper bookkeeping and the principles of proper accounting, it must be clear. No offsetting may be made between assets and liabilities. This must be signed by the general partner and kept for ten years.
In the case of corporations, the annual financial statements must be supplemented by an appendix, and a management report is also included. The annual financial statements and the management report must be prepared by the legal representatives of the corporation in the first three months of the financial year for the previous financial year and presented to the auditors. Smaller corporations are not subject to the audit obligation and have six months to prepare the annual financial statements and management report.
In the case of stock corporations , the annual financial statements and management report must be submitted to the supervisory board by the management board immediately after they have been prepared. The financial statements are adopted when the Supervisory Board approves them after the examination. The general meeting can decide on the use of the balance sheet profit. Cooperatives have five months to prepare annual accounts and a management report.
Components of the annual financial statements
In order to be able to guarantee that the annual financial statements can show, among other things, the economic situation in which a company is, a correspondingly detailed documentation must be used. Whether this is particularly extensive or just goes into various main points depends, among other things, on …
- the respective type of company
- the applicable legal regulations
to make dependent.
Thus, from small businesses operated or freelancers a EÜR typically created.
This then includes …:
- the balance sheet
- the income statement
- the appendix
- the management report (small corporations can decide for themselves whether they publish it. However, the management report is mandatory in connection with individual and consolidated financial statements.)
- the statement of changes in equity (only needs to be prepared in connection with consolidated financial statements.)
- the segment reporting (will not be issued in connection with separate financial statements. With respect to consolidated financial statements is here right to vote.)
All requirements that must be observed in this context are anchored in the HGB. However, capital market-oriented companies or groups will find their respective applicable regulations in the IFRS guidelines. However, medium-sized companies are free to decide whether they want to document in accordance with HGB or IFRS. Anyone who opts for the IFRS solution should include the following elements in their annual financial statements …:
- Balance sheet , income statement and notes (the same regulations apply here in connection with individual and consolidated financial statements as are anchored in the HGB.)
- Management report (must in all probability also be submitted in connection with individual and consolidated financial statements in the future.)
- Statement of changes in equity
- Cash flow statement
- Segment reporting (only applies in connection with individual and group annual financial statements and for capital market-oriented companies).
Expiry of the annual financial statements
The process of annual financial statements is similar for all companies that are required to keep accounts. The preparation of the financial statements begins with the preparation, which includes the balance sheet and the income statement . In addition, an appendix and a management report must be prepared; interim reports are required for various companies. The annual financial statements are submitted for review; in the case of stock corporations, the review is carried out by the supervisory board. If the annual financial statements are approved by the auditor, there is talk of a determination.
Who prepares the annual financial statements?
Companies that are obliged to prepare annual financial statements usually have these documented by their in-house accounting. If no accounting employees belong to the company, the corresponding work steps are usually outsourced, a tax advisor is the right contact person here.
Basically, all business people must prepare an opening balance sheet (at the beginning of the trade) and a balance sheet including income statement at the end of a financial year (maximum 12 months). As (almost) always there are exceptions here, too.
Exemption for sole traders
Sole traders can, under certain circumstances, be exempted from preparing annual financial statements. If, with regard to the balance sheet dates, it becomes apparent that a maximum of 600,000 euros in sales revenue and a maximum annual surplus of 60,000 euros each could be determined in two consecutive financial years , no annual financial statements need to be drawn up. (Attention: the respective maximum sums have changed since January 2016!).
Annual financial statements GmbH
In connection with the annual financial statements that are prepared by a GmbH , the so-called publication obligation also applies . More precisely: the financial statements must be published in the Federal Gazette within one year of the end of the respective fiscal year and thus made available to the public. Anyone who does not comply with this obligation can be fined a maximum of 25,000 euros .
Medium-sized and large GmbHs must publish their balance sheet, income statement, appendix and management report, as well as resolutions of the shareholders’ meeting in connection with the exploitation of results .
Only small limited companies do not have to publish their income statement in the Federal Gazette. Further special regulations apply to small GmbHs. They document using a shortened profit and loss account. The publication of a resolution on the appropriation of profits and the publication of the appendix is also not required for small GmbHs.
Corporation and its annual accounts
An important feature with regard to the preparation of annual financial statements for corporations is that the appendix is a special part of the documentation. It explains various items on the balance sheet in more detail. With its help, the current earnings situation of a company should be explained, among other things. The components of the aforementioned appendix can be viewed in the HGB.
When do companies have to submit their annual financial statements?
As a rule of thumb, the deadline that must be observed in connection with the preparation of the annual financial statements corresponds to the deadline for submitting the tax return . The key date for the information on the past year is July 31 of the current year.
However, it is also possible to apply for an extension of the deadline and thus allow yourself a little more time. Incidentally, this also applies if the relevant declarations are prepared by a tax advisor.
Where do I submit the annual financial statements?
The addressee for the annual financial statements is of course the responsible tax office . The data is transmitted electronically using the relevant software programs.
How often do annual financial statements have to be drawn up?
As the name suggests, the company has to prepare the annual financial statements at the end of the respective financial year . Of course, this offers a good opportunity to compare the current developments with the status of the previous year.
Financial statements / balance
The accounting is the valuation method by companies that need to perform a double-entry bookkeeping. Information, documentation and determination of profits are components of the balance sheet. Each business transaction within a fiscal year must be entered twice in two accounts, which consist of a credit and a debit side. The accounting is included in the annual financial statements.
Annual financial statement analysis
The preparation of annual financial statements is of course not only one of the company’s duties, but also provides the opportunity to follow the economic developments of a company even better. In this context, it is particularly important to be able to analyze the respective figures.
Furthermore, a realistic annual financial statement analysis is used to, among other things, look to credit checks more relaxed and to be able to make more informed purchase decisions. If you want to get an overview of the developments in your company, you should never neglect the aspect of a meticulous analysis of the available figures.
Approval of the annual financial statements
The annual financial statements must be approved by the supervisory board; they are adopted with the approval of the supervisory board. However, the management board and the supervisory board can decide to have the annual financial statements approved by the general meeting. The resolutions of the management board and the supervisory board must be included in the report of the supervisory board to the general meeting.
Disclosure of the annual financial statements
The annual financial statements must be published after they have been approved and the documents must be submitted to the electronic Federal Gazette . The submitted documents are made publicly accessible via the Internet portal of the company register. Publication is simplified for small and medium-sized companies.
Who has to disclose the annual financial statements?
According to § 325 ff. Of the Commercial Code , the respective form of company chosen, the balance sheet total, the number of employees and of course the sales revenue are decisive when it comes to the question of whether an annual financial statement has to be published in the Federal Gazette. The basic rule here is that corporations, registered cooperatives, various partnerships (e.g. GmbH & Co. KGs) and various branches from abroad are obliged to provide appropriate documentation.
In addition, all credit institutions, insurance companies, pension funds and financial services institutions are generally affected by the disclosure obligation .
Furthermore, all companies must publish two of the listed criteria in three consecutive financial years.
- A balance sheet total of more than 65 million euros
- Sales revenues that exceed the limit of 130 million euros
- an average number of employees of 5,000.