What is an annual report?
An annual report is a set of multiple documents. The documents contains financial information, assessment and analysis of results of company's business activities during particular period (usually during calendar year).Users of annual report usually are tax authority, shareholders, investors, customers and suppliers.
Components of the annual report.
Components are defined in the article 8, 9 and 55 of the Law On the Annual Financial Statements and Consolidated Financial Statements:-
Financial report:
- The balance sheet. Contains information about assets, liabilities and owner's equity.
- The profit or loss statement. Contains information about revenues (sales) and expenses of a company.
- Notes to the financial statements. Must include more detailed information about positions of the balance and profit / loss statement and explanations.
- For larger companies also must prepare cash flow statement and statement of changes in equity.
- If a sworn auditor examined an annual report, then also must provide information about sworn auditor.
- Management report. Must provide clear information about development of a company, about financial results and financial situation, as well as information about significant risks and uncertainties with which a company faces.
Who must submit an annual report?
According to article 3 of the Annual and consolidated annual reports law annual reports must submit:- commercial companies and European commercial companies, registered in Latvia (including limited liability companies and joint stock companies),
- cooperative societies and European cooperative societies, registered in Latvia,
- European economic interests groups,
- individual companies, farmer and fisherman farms, turnover (sales) of which increases 300 000 euro during previous taxation year.
Process of preparation of an annual report.
Process (procedure) depends on company's business activities.For example, for manufacturing company with a large amount of raw materials many customers much time takes reconciliation of balances with customers and suppliers and inventory (stocktaking) of raw materials and goods.
For small company - service provider reconciliation and inventory (stocktaking) will take less time.
General procedure is following:
- Inventory (stocktaking) of fixed assets, intangible assets, goods, materials.
- Recording of inventory results in accounting registers (general ledger).
If the value of an asset is significantly greater than or less than the cost of its acquisition or construction and the value changes are of a lasting nature (not temporary), then the asset must be revalued. - Calculate and record depreciation of fixed assets and depreciation of intangible assets.
- Recording of exchange rate fluctuations.
- Internal checking of balances of all bookkeeping accounts. Bank accounts reconcile with data in bank statement. Taxes balances reconcile with statement of the tax authority.
- Reconciliation of balances with business partners. Sending of comparison acts to all business partners. If balances do not match must reconcile each transaction during a year to find difference. It may be useful to check balances at the end of each month (or other period), in such a way faster to find period, when balances are different. The more business partners and transaction, the more workload.
- Determine amounts of doubtful and bad debtors, create provisions for doubtful debts. If necessary, write off bad debts.
- Calculate and record accrued liabilities for settlement with employees (unused vacations).
- Separate amounts of expenses of future from amounts of expenses related with the reporting year.
- Close income and expenses accounts and make relevant (corresponding) records.
- If a company needs examination of a sworn auditor, then must prepare information required by the sworn auditor and must take part in the examination process (duration of the process may be a month or longer).
How much does it cost to prepare annual report?
As you may understand it depends on amount of work (time, necessary to prepare the report).If company had no transactions or did some transactions during a year, then it may take 2-3 hours to prepare and submit the annual report.
For companies with many business partners, many transactions, big amount of net turnover and big amount of balance, it may take hundreds of hours to do all necessary, to prepare the report.
To calculate total approximate price, just multiply average hourly rate with number of hours, necessary for preparation.
If I do accounting for your company then price for preparation of annual report is included in the price for accounting services.
Otherwise price for company with no activities is 50 euro. The more activities (transactions), the more price. If you want to know exact price, please, contact and shortly describe your situation (type of activities, approximate number of transactions, number of employees, etc.).
What is necessary to start preparation?
Need all information about economic activities of a company during a year. At the beginning, need:- Bank statement.
- All invoices, bills, checks, receipts.
- Documents about salary calculations.
- Submitted tax reports and information about taxes and relations with the State revenue service (it would be useful to get access to https://eds.vid.gov.lv/login).
- Other information and documents you have.
In what cases need examination of a sworn auditor?
The legislation sets multiple conditions, but for most cases must check amount of net turnover, balance total and number of employees.Examination of a sworn auditor is necessary if the company's indicators (figures) during two consecutive years exceeds two of the following thresholds:
- Total of balance - EUR 400 000. Total of assets or total of liabilities, plus owners equity.
- Net turnover - EUR 800 000. The total of all sales.
- The average number of employees during a reporting year is 25. To calculate average number of employees, must sum number of employees at the last day of each month and divide with number of months (in general, with 12).
What period covers a reporting year?
In general a reporting year covers 12 months and is the same as calendar year (form 1st January to 31st December).First reporting year of a company may be shorter or longer than 12 months, but not longer than 18 months. For example, company is registered in August of current year. It means that first annual report company can submit only in a year after the next year.
To change period of reporting year, a limited liability company must change articles of association and record necessary period (for example, from 1st April to 31st March).
Where and when must submit annual report?
Can submit online, using eds.vid.gov.lv. Need access to the system of online declaration.Most of companies must submit annual report during a month after approval, but not later than during 4 months after the end of reporting period.
