The annual report is obligatory for all undertakings operating in Estonia and it must conform to the form established in legislation. The annual report consists of the annual accounts and the management report.
A company’s financial year is 12 months long. A financial year generally coincides with the calendar year (1 January-31 December), but a company’s articles of association may specify a different financial year.
When a company is established, dissolved, or the beginning date of the financial year changed, the financial year may in these exceptional cases be shorter or longer than 12 months, but not longer than 18 months.
Stages of preparing an annual report:
The financial statements must give a true and fair view of the company’s financial position and the results of its operations and cash flows. The annual report consists of basic reports (balance sheet, income statement, cash flow report and statement of changes in equity) and notes. The annual accounts must be prepared in Estonian and the denomination used must be euro.
1. Balance sheet and income statement
The balance sheet is a view of the company’s financial situation (assets, liabilities and equity as of the end of the financial year). The income statement lists the income and expenses and is a view of the company’s operating results during the reporting period (income, expenses and profit or loss).
2. Cash flow statement
The cash flow statement is a view of the company’s cash flows during the reporting period (receipts of cash and cash equivalents and disbursements). In this statement, you indicate the receipts and expenditures during the reporting period, grouped according to their purpose as cash flow from operating activities, investing activities and financing activities.
3. Statement of changes in equity
The Statement of changes in equity is used to recognize changes in the company’s equity during the reporting period. You are required to record separately any contributions of capital made by the owners and disbursements made to owners, profit or loss for the reporting period, impact of changes in accounting policies, increase and decrease of reserves and other economic transactions that impacted equity entries.
4. Notes to the annual accounts
The number of notes in the annual report depends on the particular company, but the following must certainly be added to the report:
The management report provides a sufficiently thorough overview of the Company’s activity and circumstances that are of material importance to evaluating the Company’s financial condition and economic activity, key events in the financial year and forecasted development trends in the next financial year.
An auditor’s report must be appended to the annual report, if your company was required to undergo an audit. An auditor’s report must be appended to the annual report of an organisation subject to accounting requirements who meets at least two of the following three conditions:
The auditor review is also obligatory for organisations subject to accounting requirements who meet at least one of the following three conditions as of the balance sheet date:
The auditor review is also obligatory for all public limited companies, organisations subject to state accounting requirements, local municipalities, public organisations, foundations and political parties funded from the state budget.
You are required to file the annual report with the Commercial Register within six months of the end of the financial year. The report can be filed electronically via the e-Commercial Register Company Registration Portal.
Informatin was taken from Estonian Information System Authority