7 Essential Steps for Filing an Annual Report

The annual obligation of all companies operating in Estonia is to submit an annual report to the Commercial Register on their completed period of operation no later than six months after the end of the financial year, which must comply with the form established by law. Undertakings whose financial year runs from 1 January to 31 December are required to submit an annual report by 30 June at the latest. As this is a nuanced report that requires a lot of time, knowledge and energy (in addition to the approval of all shareholders), it is good not to leave it to the last minute.

The length of the financial year is generally 12 months. For start-ups or undertakings wishing to change the starting date of their financial year or to close down, the financial year may exceptionally be shorter or longer than 12 months, but not more than 18 months. This means that if you started your business in June last year, you have the choice of submitting a report for the previous and current financial year together (not exceeding 18 months) or separately. The preparation of an annual report is also mandatory for companies that do not have an economic activity.

The purpose of the annual report is to provide information on the company’s operations. On the one hand, such information is collected by the state. This information may also be of interest to anyone interested in operating in your field or wishing to study the state of the market. It is possible to purchase the company’s annual reports from the Estonian Commercial Register.

The Annual Report Consists of:

  • the annual accounts;
  • the activity report.

The annual report of a micro-enterprise is very short and consists only of the annual accounts, it is not necessary to prepare an activity report. Everyone else is required to submit both annual accounts and an activity report.

As a rule, the accountant prepares the annual report technically, in accordance with the rules and the required information. The company must always read the annual report and, if necessary, ask for it to be supplemented according to what information it wants to provide additional information to readers. Additional information can be added primarily to the activity report, but additional appendices can also be prepared.

The complete set of financial statements consists of the following main statements and notes:

  • balance sheet;
  • income statement (sometimes also the statement of comprehensive income);
  • Cash flow statement;
  • Statement of Changes in Equity.

Small and micro enterprises shall prepare condensed financial statements instead of full financial statements in accordance with the following requirements:

  • The condensed financial statements of a small enterprise consist of two main accounts, the balance sheet and the profit and loss account, and a limited number of notes.
  • The condensed financial statements of a micro-enterprise consist of two main accounts – a short balance sheet and a profit and loss account and a few notes.

The activity report provides substantive information about the company’s activities and is a place to highlight important events that affected the company during the financial year and to talk in more detail about the company’s future plans.

Information to be included in the activity report:

  • overview of the company’s activities;
  • main areas of activity, product and service groups;
  • significant events during the financial year;
  • the most important investments made during the reporting year and planned in the near future;
  • research and development projects and related expenses in the reporting year and in the near future;
  • events that occurred during the period of preparation of the financial statements, which are not reflected in the financial statements, but which significantly affect or may affect the results of the following financial years;
  • overview of branches registered abroad;
  • plans for the following year.

In total, the preparation and submission of the annual report consists of 7 steps:

1. The accounting officer shall first draw up the annual accounts.

2. An activity report shall then be drawn up, normally by the company’s chief executive officer.

3. If necessary or requested, the completed report shall be submitted to the auditor, who shall verify the accuracy of the information recorded and issue his own assessment.

4. Depending on the financial results, the management shall propose to the shareholders the distribution of profits or the covering of losses, which shall be approved by the shareholders.

5. As a final step, the annual report is submitted to all shareholders for approval.

6. The annual report must be digitally signed by at least one member of the executive management.

7. The approved annual report shall then be submitted electronically to the commercial register.

NB! The Management Board, not the accountant, is responsible for the accuracy of the annual report.

By approving the annual report, the Management Board confirms the accuracy and completeness of the information presented in the annual report. If the annual report has been prepared by an accountant, make sure that all the information is correct and that you understand how the numbers in one or another part of the report are formed before finalizing and submitting the report. When preparing the activity report, keep in mind that it can be read by the customer, the supplier and the investor in the future.

Failure to Submit an Annual Report

If your company fails to submit the annual report on time, the commercial register will first send a warning and a new deadline will be given for the annual report to be submitted. The amount of the fine may also be imposed. In addition, if the company has not submitted an annual report, a note will appear in the commercial register, which will also be visible to partners and other interested parties.

For us, compiling your annual report and submitting it in a timely and proper manner is part of the professional and thoughtful accounting service we offer. As preparing an annual report can be a complex and time-consuming process, if you want to focus on your core business, leave it to our experienced accountants to prepare and submit it. In addition, it is possible to order a consultation and get answers to questions about your company. Ask for an offer! When you order accounting services for your company from SuccessHub, the preparation of the annual report is included in the monthly service fee.