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What is accounting (financial) reporting and how is it regulated?

Accounting reporting is the main financial statement the legal entity submits to the government. The accounting (financial) statement is comprised of the information about the financial state of the business at the reporting date, about the financial results of its activity, and the cash flow for the reporting period, organized in accordance with the requirements of the law.

Therefore, the financial statement should give a complete understanding of the financial state of the organization for the respective period.

According to the Accounting Act, by 31 March, each commercial enterprise within the meaning of the Commercial Act must prepare an Annual Financial Statement (AFS) for the previous year, and certain companies must publish their statements in the Commercial Register by 30 June (Art. 40 of the AA).

Important: Due to the extraordinary situation created by the Covid-19 pandemic, deadlines for publication of annual financial statements for 2019 are extended by further 3 months until 30 September 2020.

The financial statement must be:

• Truthful. It must contain accurate information and create a real understanding of the company/firm’s financial state.
• Useful. Usefulness is defined by criteria for suitability, reliability, comparability, and timeliness. Also, by its completeness.
• Substantial. It should include substantial indicators, i.e. those influencing taking of decisions in the area of economy.
• Neutral. Neutrality involves objectivity and excludes one-sided representation of interests.
• Consistent.
• Complete.

In practice, the accounting (financial) statement includes documents, which must be filled out and submitted to regulatory authorities by all organizations – commercial, budgetary, insurance, etc. These are:

• Balance sheet.
• Statement of financial results.
• Statement of changes in Equity.
• Cash flow statement.

Who is obliged to submit a financial statement?

1. All non-personified companies (companies under the Law of Obligations and Contracts or civil companies under the LOC).
2. All non-profit legal entities, regardless whether working in the public or private benefit.
3. Commercial representatives, Notary associations, mutual support organizations, lawyers’ associations and companies, registered faiths, church boards, condominium associations, and all legal entities who are not commercial enterprises and are not traders and are not non-profit legal entities within the meaning of the Law on non-profit legal entities subject to entry in the Commercial Register and the Register of Non-Profit Legal Entities.
4. Foreign nationals conducting business on the territory of the country through a place of business, which are not subject to entry in the Commercial register.

The procedure for publishing of annual financial statements is regulated in the “Law on the Commercial Register”. Let us see which companies are obliged to publish their statements in the Commercial register. All companies registered under the Commercial Act (CA) are obliged to publish their statements in the Commercial Register. These are:

• Limited liability companies (EOOD, OOD);
• Sole proprietors (ET);
• Joint-stock companies (AD);
• Limited partnerships (KD) and General partnerships (SD)
• companies registered under the Law of Obligations and Contracts (LOC) do not publish their statements in the Commercial Register. These companies’ statements are published in a specialized website or in a printed economic periodical.

Sole proprietors are exempt from the obligation to publish their annual statements in case they are not subject to independent financial audit.

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Do you need a reliable partner for you accounting? Would you like for your financial statement to be lawfully prepared and submitted in a timely manner?

The EUROCOUNT SERVICES accounting company will help you! Book a free consultation! Contact me now!

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