Finrepo » Creating and Starting Business in Finland » Accounting for Entrepreneurs and Small Business » Financial Year & Financial Statements. Finnish Company


Content

  1. The financial statement for micro-sized enterprises and self-employed persons
  2. The annual report (toimintakertomus)
  3. Attachments to the financial statement
  4. Accounting and materials' specification
  5. Signing of Financial Statements
  6. Balance sheet specifications
  7. Stock control or inventory control
  8. Bank confirmations of cash balance
  9. Fixed assets and depreciation

The financial statement for micro-sized enterprises and self-employed persons

The financial statement for micro-sized enterprises such as private traders / business operators (toiminimi) and self-employed persons (ammatinharjoittaja).

The updated Accounting Act entered into force at the beginning of 2016. The reform brought a new perception of law, especially in the accounting issues of small businesses. The law introduced some relief as required by the Directive in order to make easier the bureaucracy for small businesses. According to the revised Accounting Act micro-sized enterprises, such as private traders (toiminimi) and self-employed persons (ammatinharjoittaja), do not obligated any more to prepare the financial statement if their financial year is a calendar year.

However, there is no significant benefit from this relief, as the tax declaration has to be submitted and for this purpose the financial results of the company must be shown in the same way as for the financial statement compilation.

Companies need the financial statement also for many other purposes, such as for business contracts, loan and financing, business licenses, and even for the personal purposes of an entrepreneur, for example to get a loan for housing or consumer credit, and for determining social benefits.

In order to prepare financial statement for all these purposes always requires additional work, so it is recommended to continue preparing the financial statements for micro-sized enterprises (toiminimi) and self-employed persons (ammatinharjoittaja).

The annual report (toimintakertomus)

The annual report is a separate part of the financial statement. This report is not required for micro and small businesses. However, a limited liability company must always disclose in its financial statements the information concerning annual report and required by the Limited Liability Companies Act / Osakeyhtiölaki (in English) and (in Finnish), and the information may also be disclosed in the attachment under the heading: "The annual report according to the Limited Liability Companies Act." If you would like to prepare an annual report for a small company, you must ensure that it meets all the requirements of accounting law and other laws. The annual report includes, for example: assess the major risks and uncertainties over the scale and structure of the company and other factors affecting business development as well as its financial position and result.

Attachments to the financial statement (liitetiedot)

The financial statements have to give a true and fair view of the financial position of the entity. According to the law the financial statement also includes attachments. The scope and content requirements of the attachments depend on the size and forms of business, i.e. whether it is a limited liability company, a partnership or self-employed person.

Accounting and materials' specification

As part of the financial statement the specification shows what kind of accounting the company has (the main accounting and different parts of an accounting). It also provides an explanation of the types of supporting documents and the content of other accounting materials, as well as their interconnections and keeping methods. This specification is included in to financial statement certified and signed by the entrepreneur or other responsible person in the company.

Signing of Financial Statements

The financial statement is considered to be completed when the Board of Directors and Manager of the limited liability company, the responsible cofounders of the partnership, the owner of the business or self-employed person have signed the financial statement [and the annual report].

The financial statement of the association has to be signed by the members of the Board of Directors which number shall constitute a quorum at the time of signing. It is irrelevant as for the responsibility of a member of the Board of Directors whether or not he has signed himself the financial statement. Each Board of Directors is responsible for the administration and activity during their own term of office.

Balance sheet specifications (tase-erittely)

According to the law the balance sheet specifications are the part of the financial statements, but they are not public information. In the balance sheet specification listed in detail the content of each account of the balance sheet with the exception of equity capital (equity is specified in the attachments to the balance book). For example, the specification of the accounts payable contains information about each invoice that have been received but has not been paid by the date of the financial statement preparation. The specification contains the creditor's name, location/region, invoice date, number, and amount in euro. In such a way all balance sheet content is classified by groups.

The balance sheet specifications must be certified by signature. The management of the company is responsible to provide all necessary and correct information for their accounting firm for making specifications, for example working capital / stock specifications may be generated after taking an inventory control in the company.

It is good to attach the income statement (per account) and balance sheet (per account) to the balance sheet specification. Hereby have shown, first of all, the reflection of the audit trail, the chain of records of the general ledger and the financial statement, and secondly, the list of used accounts when these accounts have balances at the balance sheet reporting date.

Stock control or inventory control

In order to make the balance sheet specifications of current assets is required to do an inventory/ physical stock count. It is important to make inventory correctly. Accurate valuation is essential because the change in the value of the inventory of the previous financial statement is recorded to the income statement increasing or decreasing the company's result. The stock control or inventory control have to be compiled always by companies (companies that are obligated to keep accounting records / legal entities with accounting obligations) itself and certified by signature.

The stock control or inventories of the current assets have to be done based on prices without VAT or using lower probable purchasing prices.

If it is difficult to determine the purchase price for each item of the same good in the stock, the latest purchase price can be used and should be mentioned the amount of goods in the stock. The idea is that the goods move around according to the so-called FIFO method (first-in, first-out) used in managing inventory, which mean that the first goods purchased are also the first goods sold (the first units of stock are also the first ones that be sold; first come, first sold).

If the goods in the stock are self-manufactured, as an inventory value can be used the "price" of the commodity based on the costs, which includes variable VAT-free costs of purchasing and manufacturing.

The purpose of the inventory is to obtain the actual value of the inventory in the balance sheet, on the basis of which the inventory /stock change can be calculated (compared to the previous inventory value, the previous value = 0 for the start-up company). The calculated inventory/stock change will adjust the costs of purchase in the income statement in order that only purchases corresponding to the sales during the current financial year will be directed to this financial year. During the financial year, all purchases are recognized as expenses in the current financial year, and these entries will then be corrected at the latest in the financial statements by adjusting the "inventory change".

Bank confirmations of cash balance / confirmation of bank balances

To ensure the correctness and accuracy of the financial statement the balance confirmations on the financial statement date have to be provided and appended to the financial statement materials. The bank accounts and loan balances included in the financial statement should be consistent with the bank's confirmations. Similarly, it is required to obtain external confirmations for other material assets and liabilities.

Fixed assets and depreciation:

There is an own regulation in accounting for acquired property /assets generating income during several years (machineries, equipment, devices, cars, buildings, etc). The purchases of this property are recorded in accounting as an expense according to defined plan of depreciation or progressively, according to how they generate revenue in the coming years.

You can look at the financial statement model recommended by the Taloushallintoliitto / Financial Management Association, for example from the publication "An example of financial statement of limited liability company".

  previous page   next page