An annual report is a set of multiple documents. The documents contain financial information, an assessment and analysis of the company's performance results for a specific period (usually during the calendar year).
The users of the annual report are usually the tax administration, shareholders (owners of capital shares), investors, clients and suppliers.
Balance sheet. Contains information on assets, liabilities and equity.
Profit or loss statement. Contains information on the company's income (the amount of goods sold and services provided) and expenses.
Notes to the financial statements. The notes provide explanations and more detailed information on the items of the balance sheet and the profit or loss statement.
Larger companies must also prepare a cash flow statement and a statement of changes in equity.
If the annual report is audited by a sworn auditor, the annual report must also include information about the sworn auditor.
Management report. Clear information must be provided on the company's development, financial results and financial position, as well as information on significant risks and uncertainties faced by the company.
The larger the company, the more components (documents) must be included in the annual report.
commercial companies and European companies registered in Latvia (including limited liability companies and joint stock companies),
cooperative societies and European cooperative societies,
European economic interest groupings,
individual enterprises, farms of farmers and fishermen whose turnover (the amount of goods sold and services provided) in the previous taxation year exceeds EUR 300,000.
The process of preparing the annual report
The process (procedure) depends on the company's economic activity.
For example, a manufacturing company with a large volume of raw materials and a large number of clients needs a lot of time to reconcile accounting balances with customers and suppliers, as well as a lot of time to carry out inventory of raw materials and goods.
In a small company – a service provider, the reconciliation of accounting balances and inventory will take less time.
The general procedure is as follows:
Inventory of fixed assets, intangible investments, goods, materials (raw materials).
Recording the results of the inventory in the accounting registers (general ledger or main ledger). If the value of an asset is significantly higher or lower than its acquisition or creation costs and the change in value is long-term (not temporary), then the asset must be revalued.
Calculation and recording of depreciation of fixed assets and intangible investments.
Recording of foreign exchange rate fluctuations. The balances indicated in the bank account statement are recalculated into euros and compared with the accounting data. If the accounting data differs, the difference is recorded.
Internal verification of the balances of all accounting accounts. Bank account balances are compared with bank statement data. Tax balances are compared with the State Revenue Service data.
Reconciliation of accounting account balances with business partners. Reconciliation statements must be sent to all business partners. If the balances do not match, each transaction must be checked to find the difference. It may be useful to check the balances at the end of each month (or other period), thus more quickly finding the period in which the balances begin to differ. The more business partners and transactions, the more time must be spent on reconciliation.
The amounts of doubtful and lost debts must be determined, provisions for doubtful debts must be created. If necessary, lost debts must be written off as expenses.
Accrued liabilities for settlements with employees (unused vacations) must be calculated and recorded.
Expenses of subsequent periods must be separated from the expenses of the reporting year. If payment for expenses relating to subsequent reporting years has been made in the reporting year, the respective amounts must be recorded in the deferred expenses account.
Income and expense accounts must be closed and the corresponding entries made.
If the company requires an audit by a sworn auditor, the information requested by the sworn auditor must be prepared, and participation in the audit process is required (the process may last a month or longer).
How much does the preparation of an annual report cost?
The fee depends on the amount of work (the time required to prepare the annual report).
If the company has not carried out any transactions during the year or has carried out a few transactions, the time required for the preparation and submission of the annual report is 2-3 hours.
For companies with many business partners, many transactions, a large net turnover and a large balance sheet total, hundreds of hours may be required to prepare the annual report.
To calculate the total approximate price, simply multiply the average hourly rate (in the industry) by the number of hours to be spent preparing the annual report.
If I keep the accounting records for your company, the price for preparing the annual report usually is included in the price of accounting services.
Otherwise, the price for preparing the annual report for a company without activity (without transactions) is 50 euros. The more transactions, the higher the price. If you want to know the exact price, please contact me and briefly describe your situation (type of activity, approximate number of transactions, number of employees, etc.).
What is necessary to start preparing the report?
All information about the company's economic activity during the year is required. Initially I need the following:
Bank statements.
All invoices, delivery notes, receipts, vouchers.
Documents on salary calculations.
Submitted tax reports and information on taxes and relations with the State Revenue Service (it would be useful to obtain access to https://eds.vid.gov.lv/login).
Other information and documents at your disposal.
During the process of recording transactions, I may need to ask questions and request additional documents.
In what cases is an audit by a sworn auditor required?
The legislation provides for several conditions, but in most cases the amount of net turnover, the balance sheet total and the number of employees must be checked.
An audit by a sworn auditor is required if for two consecutive years the company's indicators exceed two of the following indicators:
Balance sheet total – EUR 500,000. Total assets. Or total liabilities plus equity.
Net turnover – EUR 1,000,000. The amount of goods sold and services provided.
The average number of employees in the reporting year is 25 or more. To calculate the average number of employees, the number of employees on the last day of each month must be added up and divided by the number of months (basically by 12).
What period does the reporting year cover?
In general, the reporting year covers 12 months and coincides with the calendar year (from 1 January to 31 December).
The company's first reporting year may be shorter or longer than 12 months, but not longer than 18 months. For example, the company is registered in August of this year. This means that the company can submit the first annual report only in the year after next.
To change the period of the reporting year, a limited liability company must amend the articles of association and enter the required period in the articles of association (for example, from 1 April to 31 March).
Where and when must the annual report be submitted?
The annual report can be submitted electronically using eds.vid.gov.lv. Access to the electronic declaration system is required.
For the majority of companies, the annual report must be submitted within a month after its approval, but no later than within 5 months after the end of the reporting period (year).
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