Most probably, everyone who is at least remotely involved in the business environment has heard or seemingly knows the phrase “annual report”. But what lies behind these words exactly, what information is included in the annual report and why is it necessary to prepare it in general? Let’s find out!
What is “the annual report”?
Just as students receive a certificate at the end of the school year, which contains all the essential information about the achievements in the relevant semester – both the grades and missed lessons – companies and institutions also have to prepare an annual report after the end of each financial year – a set of documents about the company operation during the particular period.
Who submits “the annual report”?
The annual report is submitted by commercial companies and European commercial companies that are registered in Latvia, cooperative societies and European cooperative societies, European economic interest groups, sole proprietorships, farmers and fishermen’s farms, whose turnover in the previous taxation year exceeds 300 000 euros.
The annual report is prepared and submitted by an internal or outsourced accountant or company manager.
How is “the annual report” prepared?
The process of preparing the annual report depends on various factors – the size of the company, as well as the represented industry. Accordingly, several steps are taken to prepare the report, for example, inventory of fixed assets and goods, calculation and recording of depreciation, comparison of bank account statements with accounting data, internal inspection of account balances, etc.
What is used in preparing “the annual report”?
To prepare the annual report, the accountant needs to use a lot of information:
- bank statements;
- invoices, bills of lading, cheques, receipts;
- salary calculation documents;
- submitted tax returns, etc.
What can be found in “the annual report”?
The Law on Annual Financial Statements and Consolidated Financial Statements stipulates what information must be included in the annual report. It must include:
- financial statement;
- balance sheet;
- profit or loss statement;
- management report;
- annexes providing detailed information on the items of the report;
- some companies are also required to prepare a cash flow statement and a statement of changes in equity;
- if the report is reviewed by a sworn auditor, information regarding the auditor must also be provided.
Who needs it?
The annual report is submitted to the State Revenue Service within a specified period of time, where it is inspected, and thus the officials verify the performance of the companies. The annual reports are also “read” by the company management, shareholders, investors, customers and suppliers – people who need to know how the particular company works and what the prospects for its development are.
Currently, annual reports are only submitted electronically, using the SRS Electronic Declaration System – www.eds.gov.lv. Most companies must submit the annual report within one month of its approval, but no later than 4 months after the end of the reporting period (year).