Every year, companies are required to prepare annual financial statements that disclose the economic success of the business. Various requirements must be taken into account: All relevant information must be recorded correctly to avoid time-consuming reworking of receipts and documents at a later date. Furthermore, the annual financial statements must be submitted to the tax office on time to avoid potential tax problems. By working carefully and consistently during the financial year, the preparation of annual financial statements can be considerably simplified and accelerated.
What is the significance of the annual financial statements?
The annual financial statements serve as an important tool for external and internal reporting. External parties such as investors, creditors and regulators use the annual financial statements to gain insight into the financial health and performance of a company. Internally, the annual financial statements serve as the basis for financial decisions and the monitoring of company performance.
What are the components of annual financial statements?
Annual financial statements typically consist of several main components:
- Balance sheet: The balance sheet provides an overview of the company's assets, liabilities and equity as at a specific reporting date.
- Profit and loss account: The profit and loss account shows the company's income, costs and profit or loss during the financial year.
- Cash flow statement: The cash flow statement provides information on the company's cash inflows and outflows during the financial year.
- Statement of changes in equity: This statement documents the changes in the company's equity, including capital raised, profits, losses and dividend payments.
- Notes: These contain additional information that supplements and explains the financial statements presented in the main part of the annual financial statements.
- Management Report: This report (also referred to as the "Management Report" or "Management Discussion and Analysis") provides a comprehensive presentation of the company's business performance, risks, opportunities and future prospects.
How do you prepare annual financial statements?
The preparation of annual financial statements requires the cooperation of several departments within a company or organization. The following steps are usually required:
- Recording of financial transactions: All relevant financial transactions must be recorded and documented in the corresponding accounts.
- Accounting and records: The accounting teams process the recorded transactions and create the necessary accounting records.
- Preparation of interim reports: Interim reports are prepared during the financial year to monitor the company's financial performance and prepare forecasts.
- Preparation of the financial statements: At the end of the financial year, all relevant data and records are collected in order to prepare the annual financial statements.
- Audit and review: The annual financial statements are generally reviewed by internal or external auditors to ensure that they comply with the applicable accounting standards.
- Publication and disclosure: The finalized annual financial statements are published and made available to the relevant stakeholders.
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What information can be found in the notes to the annual financial statements?
A distinction is made between different types of information in the notes to the financial statements, including mandatory disclosures, optional disclosures, other disclosures and voluntary disclosures. Here is an explanation of this distinction:
- Mandatory disclosures: These are disclosures that are required by law and must be included in the notes. The exact mandatory disclosures vary depending on the applicable accounting regulations and the country in which the company prepares its annual financial statements. Examples of mandatory disclosures include information on the balance sheet, income statement, equity, fixed assets, liabilities, sales revenue, etc.
- Mandatory information: This includes data for which the company can choose between various possible options. It is at the discretion of the company whether or not to make these disclosures. Examples of optional disclosures may include additional information on certain assets, liabilities or transactions that are not part of the mandatory disclosures.
- Other information: Relevant information for the accounting and valuation of the company. These disclosures may include, for example, information on contracts, personnel costs, taxes, research and development costs, leases, environmental impact or segment reporting.
- Voluntary disclosures: This is additional information that the company may voluntarily provide in the notes to the financial statements to further explain the financial statements or to enable readers to better understand the company's financial position and performance. Such voluntary disclosures may include information on corporate strategy, innovation strategy, corporate governance or the company's sustainability performance.
The notes are mandatory for corporations, limited liability partnerships and cooperatives. Partnerships, sole traders and associations are exempt. The German Commercial Code (HGB) stipulates who must provide mandatory information and to what extent. This depends on the size of the company:
- Micro-corporations (§267a HGB)
- Small corporations (§267 (1) HGB)
- medium-sized corporations (§267 (2) HGB)
- and large corporations (§267 (3) HGB)
Who has to prepare annual financial statements?
The obligation to prepare annual financial statements depends on various factors, such as the legal form of the company and the applicable accounting regulations in the respective country. In general, companies that are registered as corporations, such as joint-stock companies or limited liability companies , are obliged to prepare annual financial statements. Another basic rule is that all companies that have to keep double-entry bookkeeping are also obliged to prepare annual financial statements.
For smaller companies, sole traders and freelancers, it is sufficient to prepare an income statement (EÜR) as long as they remain below a specific turnover limit. However, if this limit is exceeded, these business groups are also obliged to submit annual financial statements. In general, all credit institutions, insurance companies, pension funds and financial services institutions are also affected by the disclosure obligation. These companies are subject to specific supervisory and regulatory authorities that prescribe certain reporting obligations in order to ensure the transparency and stability of the financial sector.
According to the German Commercial Code (HGB), the companies that are obliged to prepare annual financial statements can be broken down as follows:
- Corporations (AG, GmbH, UG)
- Partnerships (OHG, KG and GbR)
- Mixed forms (GmbH and Co. KG or AG and Co. KG)
If the accounting documents are incomplete or not submitted on time, the Federal Office of Justice will initiate administrative fine proceedings. If an annual financial statement published in the Federal Gazette violates content or form requirements, fine proceedings may be initiated. If administrative fines, penalties or procedural costs are not paid, enforcement proceedings are initiated.
Who has to publish their annual financial statements?
The publication of annual financial statements is an important step in the financial reporting of companies. It not only serves to fulfill legal obligations, but also provides an insight into the economic situation and success of a company. From corporations and partnerships to financial services institutions and insurance companies, many companies are obliged to make their annual financial statements transparent and publicly accessible.
The disclosure of annual financial statements is subject to various exemptions and obligations depending on the size of the company. If two of the following criteria apply to a company for three consecutive financial years, there is an obligation to disclose its annual financial statements:
- Sales of more than 130 million euros
- over 65 million euros in total assets
- over 5,000 employees on average
There are many other companies that are subject to disclosure requirements and must publish their annual financial statements in the Federal Gazette. This group includes:
- Banks and insurance companies
- Energy supply company
- Corporations: Stock corporations (AG), partnerships limited by shares (KGaA), limited liability companies (GmbH), entrepreneurial companies (haftungsbeschränkt) (UG (haftungsbeschränkt))
- Commercial partnerships without a natural person as a personally liable partner (GmbH & Co. KG)
- Investment fund and capital management companies in accordance with the German Investment Code (KAGB)
- Issuers of investments, Section 23 of the German Investment Act (VermAnlG)
- Small companies; companies that do not conduct any business activities; and companies in insolvency or liquidation; so-called micro-enterprises
It is important to comply with the disclosure requirements under applicable laws and regulations and to submit the annual financial statements to the relevant authorities in a timely manner. Companies should contact the relevant authorities and regulators to ensure that they take all necessary steps to publish the annual financial statements properly.
Who usually audits the annual financial statements?
The annual financial statements are usually audited by external auditors. These auditors are independent experts who examine the financial records of a company to ensure that they comply with the applicable accounting standards. The detailed audit and review of the annual financial statements are carried out in accordance with the legal provisions and regulations of the respective country.
The auditors audit the annual financial statements for accuracy, completeness and compliance with recognized accounting principles. They also check whether the information presented in the annual financial statements gives a true and fair view of the company's financial position. The audit often includes a detailed analysis of the accounting records, an assessment of the company's internal controls and the performance of tests and investigations to verify the accuracy of the financial information.
Once the audit has been completed, the auditors prepare an audit report containing their opinion on the accuracy of the annual financial statements. This report is made available to shareholders, creditors and other interested parties in order to give them confidence in the financial integrity of the company.
What different deadlines apply to the annual financial statements?
Annual financial statements: general deadlines and deadline extensions
The deadlines for annual financial statements in Germany are of great importance for companies and play a central role in
financial reporting. It is important to understand that these deadlines are not uniform, but depend on different factors. Corporations as well as partnerships and sole proprietorships have specific deadlines that they must meet in order to properly prepare and submit their annual financial statements.
The deadline for the annual financial statements and tax return under the
German Commercial Code (HGB) is
July 31. These documents must be submitted electronically to the tax office. If a
tax advisor is responsible for the annual financial statements, it is possible to extend the deadline.
If it is
not possible to
meet the original deadline for legitimate reasons, such as lack of time or unforeseen circumstances, an
application for an extension of the deadline can be submitted. To apply for an extension, you should generally send an informal written application to the relevant tax office explaining the reasons for the desired extension.
The tax office will carefully examine the application and then decide whether to grant the extension. In many cases, an extension is granted until a certain date, usually
the end of February of the following year.
Annual financial statements
: submission deadlines according to company size
The submission deadlines for the annual financial statements vary depending on the
size and type of company. Small and very small GmbHs, GmbH & Co. KGs, stock corporations and other limited liability companies are obliged to submit their annual financial statements for the previous financial year within the first 3 months of the current financial year.
Large and medium-sized GmbHs, GmbH & Co. KGs, public limited companies and other limited liability companies, on the other hand, have a longer deadline of
6 months. This means that they must submit their annual financial statements within the first 6 months of the current financial year.
The submission deadline for registered cooperatives is
5 months. This means that they must submit their annual accounts for the previous financial year within the first 5 months of the current financial year.
It is important to
pay close attention to these
deadlines in order to avoid possible
sanctions or penalties. Companies should start preparing their annual financial statements in good time to ensure timely and proper submission.
Practical tip: fileee allows you to set reminders for important dates and deadlines, including the deadline for preparing the annual financial statements. You will be notified in good time to make sure you don't miss any deadlines.
