Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
7 December 2017 [shall come
into force on 3 January 2018];
11 November 2021 [shall come into force on 1 January
2022];
8 March 2023 [shall come into force on 22 March
2023].
If a whole or part of a section has been amended, the
date of the amending law appears in square brackets at
the end of the section. If a whole section, paragraph or
clause has been deleted, the date of the deletion appears
in square brackets beside the deleted section, paragraph
or clause.
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The Saeima1 has adopted
and the President has proclaimed the following law:
Law on Annual
Statements and Consolidated Annual Statements
Chapter I
General Provisions
Section 1. Terms Used in this
Law
(1) The following terms are used in this Law:
1) associated undertaking - an undertaking in which
another undertaking has participating interest and over whose
operating and financial policies that other undertaking exercises
significant influence that is ensured with no less than 20 and no
more than 50 percent of stockholders' or members' voting
rights;
2) development costs - costs which are directly
eligible to development measures or which may be justifiably
related to these measures;
3) balance sheet date - last day of the financial
year;
4) balance sheet value - the amount by which assets or
liabilities are indicated in the balance sheet;
5) relevant information - such information regarding
which there is the basis to consider that non-disclosure or
incorrect provision thereof in financial statements could change
or influence a decision taken by a person on the basis of such
financial statements. The relevance of information to be
disclosed in an individual financial statement item shall be
evaluated in relation to other similar items of such financial
statements;
6) financial assets:
a) cash;
b) capital security of another undertaking;
c) the right laid down in the agreement to receive cash or
another financial asset from another person or mutually exchange
financial assets or financial commitments with another person
under circumstances which are potentially favourable for the
undertaking;
d) financial instrument regarding which the undertaking will
settle accounts (or may settle accounts) with its own capital
securities, if it is not a derivative and the undertaking has (or
may have) an obligation to receive a variable number of its own
securities or if it is a derivative and the undertaking will
settle accounts (or may settle accounts) otherwise than by
exchanging a fixed amount of cash or other financial asset
against a fixed number of its own capital securities. By applying
this term, the undertaking shall not include the financial
instruments in its own capital securities, which are an agreement
regarding receipt of the undertaking's own capital securities or
delivery thereof in the future;
7) financial liabilities:
a) the obligation laid down in the agreement to transfer cash
or other financial asset to another person or mutually exchange
financial assets or financial commitments with another person
under circumstances which are potentially favourable for the
undertaking;
b) financial instrument regarding which the undertaking will
settle accounts or may settle accounts with its own capital
securities, if it is not a derivative and the undertaking has (or
may have) an obligation to deliver a variable number of its own
securities or if it is a derivative and the undertaking will
settle accounts (or may settle accounts) otherwise than by
exchanging a fixed amount of cash or other financial asset
against a fixed number of its own capital securities. By applying
this term, the undertaking shall not include the financial
instruments in its own capital securities, which are an agreement
regarding receipt of the undertaking's own capital securities or
delivery thereof in the future;
8) accounting policy - principles, methods, and
regulations for accounting of the relevant economic transactions,
facts, and events and assessment and indication of items of the
financial statement (in the financial statement) (for example,
methods for assessment of fixed assets or calculation of
depreciation, methods for assessment of debts of debtors or
balances of stocks, principles for accounting and indication of
loan interest and fine, conditions and methods for establishment
of reserves which are used for indication of profit or loss, or
cash flow in the financial statement);
9) parent undertaking of the group of companies - a
commercial company or cooperative society registered in the
Republic of Latvia, a European economic interest grouping
registered in the Republic of Latvia, a European cooperative
society, or a European commercial company which controls one or
several subsidiaries thereof in accordance with the procedures
laid down in this Law;
10) subsidiary of a group of companies - a commercial
company or cooperative society registered in the Republic of
Latvia, a European economic interest grouping registered in the
Republic of Latvia, a European cooperative society, or a European
commercial company, or a commercial company registered in another
country which is controlled by a parent undertaking thereof in
accordance with the procedures laid down in this Law. Any
subsidiary of a subsidiary of a group of companies shall be
considered a subsidiary of the parent undertaking of that group
of companies;
11) group of companies - an aggregate of undertakings
which includes a parent undertaking of the group of companies and
all subsidiaries thereof;
12) consolidation - the unification of the annual
statements of companies within a group of companies in accordance
with the procedures laid down in this Law;
13) consolidated annual statement - the annual
statement of a group of companies which has been prepared in
accordance with the procedures laid down in this Law as if it was
the annual statement of a single separate undertaking and which
provides information on the whole group of companies as a single
undertaking;
14) minority stockholders - stockholders or members of
a subsidiary of the group of companies which are neither
stockholders, members or partners of the parent undertaking of
the group of companies (hereinafter - stockholders or members),
nor other subsidiary involved in the consolidation;
15) intangible investments - intangible properties
other than financial assets and complying with both the following
classification criteria:
a) they can be separated or divided from an undertaking and
sold, transferred, licensed, rented out or exchanged
(individually or together with another liability or asset) or
they have arisen from an agreement or other rights regardless of
whether such rights are transferable or separable from the
undertaking or from other rights and obligations;
b) an undertaking intends to use them for more than one year
and expects that economic benefits will be received from holding
of such properties;
16) event after the balance sheet date - a favourable
event (for example, profit arisen or expected, increase in assets
value or reduction in the amount of liabilities) or unfavourable
event (for example, costs or loss arisen or expected, reduction
in assets value or increase in the amount of liabilities) during
the time period between the balance sheet date and the date of
signing the annual statement;
17) fixed assets - movable or immovable tangible
properties complying with all of the following classification
criteria::
a) they are held by the undertaking as the owner or lessee in
accordance with a financial lease in order to use them for the
production of goods, provision of services, renting out or for
administrative purpose (for the administrative needs or other
needs of the undertaking, for example, for the maintenance of
operation of other fixed assets, ensuring meeting the labour
safety or environmental protection requirements significant for
the principal activity of the undertaking);
b) the undertaking intends to use them for more than one year
and expects that economic benefits will be received from holding
of such properties;
c) they are not purchased and are not held for sale;
d) their useful life is longer than one standard operation
cycle;
18) fair value - the amount which would be received
upon selling an asset, or would be paid by fulfilling liabilities
in a standard transaction between market participants on the date
of assessment of the abovementioned asset or liability;
19) research costs - the costs which are directly
applicable to research measures, as well as such costs which have
arisen in the project development stage of creation of a
particular intangible investment object, if the undertaking
cannot separate the research stage of such project from its
development stage;
20) acquisition price - the amount to be paid in money
or its equivalents, or the fair value of consideration
transferred for acquisition of the goods or service at the time
when the asset was acquired;
21) management:
a) in a capital company, as well as in a cooperative company -
the executive board and supervisory board (if the supervisory
board has been established);
b) in a partnership - all members of such undertaking or such
members of the undertaking who have a special authorisation to
represent the undertaking;
c) in an individual undertaking, farming or fishing enterprise
- the owner of the undertaking or enterprise accordingly;
22) adjustments of reduction in the value - adjustments
which are made in order to indicate reduction in the value of
assets on the balance sheet date regardless of whether this
reduction in the value is final or not. Adjustments of reduction
in the value shall also mean calculation of the annual
depreciation of fixed asset and annual write-off of intangible
investments.
(2) The terms "financial instruments", "capital securities",
and "transferable securities" used in this Law conform the terms
used in the Financial Instrument Market Law.
(3) The term "related parties" used in this Law conforms to
the term used in IAS 24 "Related party disclosures" referred to
in Annex to Commission Regulation (EC) No 1126/2008 of 3 November
2008 adopting certain international accounting standards in
accordance with Regulation (EC) No 1606/2002 of the European
Parliament and of the Council.
[7 December 2017]
Section 2. Scope of Application of
this Law
This Law prescribes:
1) the content of the annual statement, the procedures for
preparation, audit (revision), approval, submission, and
publication thereof, as well as the amount of information to be
disclosed in the annual statement, reliefs and exemptions in
distribution according to categories of companies;
2) the companies to be involved in the consolidation, reliefs
and exemptions for parent undertakings of the group of companies,
as well as the procedures for preparation, audit (revision),
approval, submission, and publication of the consolidated annual
statement;
3) the person responsible for preparation, audit (revision),
and submission of the annual statement and consolidated annual
statement.
Section 3. Subjects of the Law
(1) This Law shall apply to:
1) commercial companies, cooperative companies registered in
the Republic of Latvia, European economic interest groupings,
European cooperative societies, and European commercial companies
registered in the Republic of Latvia;
2) individual undertakings, farming and fishing enterprises
whose turnover (revenue) from the economic transactions during
the previous financial year exceeds 300 000 euro.
(2) This Law shall be applied to annual statements of the
persons referred to in Paragraph one of this Section (hereinafter
also - the undertaking) and consolidated annual statements of the
undertakings referred to in Paragraph one, Clause 1 of this
Section.
(3) Individual undertakings, farming and fishing enterprises
may prepare an annual statement taking into account the
provisions of this Law also if their turnover (revenue) from
economic transactions in the previous financial year does not
exceed 300 000 euro.
(4) This Law shall not apply to credit institutions, savings
and loan societies, insurance companies, re-insurance companies,
private pension funds, investment companies, investment
management companies, as well as alternative investment funds
founded as commercial companies.
(5) A development financial institution and a commercial
company, which in accordance with the Financial Instrument Market
Law prepare an annual statement and consolidated annual statement
in conformity with the international accounting standards adopted
in accordance with Regulation (EC) No 1606/2002 of the European
Parliament and of the Council of 19 July 2002 on the application
of international accounting standards (hereinafter - the
international accounting standards):
1) by way of derogation from the principles and regulations to
be applied for the assessment of annual statement and financial
statement items laid down in this Law, the annual statement items
shall be assessed in accordance with the international accounting
standards;
2) by way of derogation from the provisions of this Law for
the preparation of a balance sheet, profit or loss account, cash
flow statement, and statement of changes in equity, individual
financial statement items need not be indicated if they are not
significant or their non-indication makes the financial statement
more transparent, as well as additional items may be included,
however, in any case the information indicated in the items must
conform to the international accounting standards;
3) in addition to the provisions for the preparation of annex
to the financial statement laid down in this Law, explanatory
information shall be provided in accordance with the
international accounting standards;
4) by way of derogation from the provisions of this Law, the
consolidated annual statement shall be prepared in conformity
with the international accounting standards. In such case the
provisions of Clauses 1, 2, and 3 of this Paragraph shall be
applied for the assessment of the consolidated annual statement
items and consolidated financial statement items, components of
the consolidated financial statement and for the provision of
explanatory information in the consolidated financial statement
accordingly.
(6) A development financial institution a the commercial
company, the transferable securities of which are included in the
regulated market of the Republic of Latvia or another European
Union Member State (hereinafter - the regulated market), shall
apply the requirements of this Law binding on a large
undertaking.
(61) If a commercial company the transferable
securities of which were included in the regulated market in the
previous reporting year and which had prepared the annual
statement and consolidated annual statement under the Financial
Instrument Market Law according to the international accounting
standards ceases to be the regulated marked participant in the
reporting year, it may continue to prepare the annual statement
and the consolidated annual statement according to the
international accounting standards. The provisions of Paragraph
five, Clauses 1, 2, 3, and 4 and Paragraph six of this Section
shall apply to a commercial company who uses the opportunity
provided in this Paragraph.
(7) A capital company, which in conformity with the provisions
of this Law is a large undertaking, may prepare an annual
statement in accordance with the international accounting
standards. In such case the capital company shall apply the
provisions of Paragraph five, Clauses 1, 2, and 3 of this Section
to the assessment of financial statement items, components of the
financial statement and provision of the explanatory information
in the financial statement accordingly.
[7 December 2017; 11 November 2021]
Section 4. Language and Value
Measurement
(1) An annual statement and a consolidated annual statement
shall be prepared in the Latvian language.
(2) The currency unit euro shall be used in the annual
statement and consolidated annual statement and the numbers shall
be rounded up to whole numbers (euro).
(3) By derogation from that abovementioned in Paragraph two of
this Section regarding rounding up of numbers, it shall be
permitted to round up the numbers to thousands (euro) in the
consolidated annual statement.
Chapter
II
Division of Undertakings and Groups of Companies
Section 5. Categories of
Undertakings
(1) In applying this Law, undertakings shall be divided in the
following categories depending on the limit values of criteria
laid down below:
1) a micro-entity;
2) a small undertaking;
3) a medium-sized undertaking;
4) a large undertaking.
(2) A micro-entity is a small undertaking which on the balance
sheet date does not exceed at least two of three limit values of
the criteria referred to in this Paragraph:
1) balance sheet total - EUR 350 000;
2) net turnover - EUR 700 000;
3) average number of employees during the reporting year -
10.
(3) A small undertaking is such undertaking which on the
balance sheet date does not exceed at least two of three limit
values of the criteria referred to in this Paragraph:
1) balance sheet total - EUR 4 000 000;
2) net turnover - EUR 8 000 000;
3) average number of employees during the reporting year -
50.
(4) A medium-sized undertaking is such undertaking which is
not a small undertaking and which on the balance sheet date does
not exceed at least two of three limit values of the criteria
referred to in this Paragraph:
1) balance sheet total - EUR 20 000 000;
2) net turnover - EUR 40 000 000;
3) average number of employees during the reporting year -
250.
(5) A large undertaking is such undertaking which on the
balance sheet date exceeds at least two of three limit values of
the criteria referred to in Paragraph four of this Section.
(6) If the undertaking on the balance sheet date does not
exceed two limit values of the criteria referred to in Paragraph
two, three, or four of this Section two years in succession (in
both, current and previous reporting year), it shall obtain the
right to provide the minimum information in its annual statement
that has been laid down in this Law for the relevant category of
undertakings whose indicators it does not exceed and also shall
obtain the right to apply the reliefs or exemptions laid down in
this Law which are provided for the relevant category of
undertakings. The undertaking shall lose this right, if in
subsequent reporting years it exceeds the referred to limit
values and this reoccurs two reporting years in succession. If
the indicators of the economic activity of the undertaking
fluctuate on a year-by-year basis and every year it conforms to a
different category of undertakings, the relevant undertaking, in
preparing the annual statement, shall comply with the provisions
stipulated for a higher category of undertakings (if compared
with the category to which it conforms in the current reporting
year with that to which it conformed in the previous reporting
year).
(7) A newly established undertaking and an individual
undertaking, farming and fishing enterprise that becomes the
subject of this Law in the reporting year, if on the balance
sheet date it does not exceed two limit values of the criteria
referred to in Paragraph two, three, or four of this Section, is
entitled to provide the minimum information in its first annual
statement that has been laid down in this Law for the relevant
category of undertakings whose indicators it does not exceed and
also is entitled to apply the reliefs or exemptions laid down in
this Law which are provided for the relevant category of
undertakings.
[7 December 2017]
Section 6. Categories of Groups of
Companies
(1) In applying this Law, groups of companies shall be divided
in the following categories depending on limit values of the
criteria laid down below:
1) a small group of companies;
2) a medium-sized group of companies;
3) a large group of companies.
(2) A small group of companies is such group of companies,
whose undertakings (as an aggregate) to be involved in the
consolidation according to annual statements of the undertakings
to be involved in the consolidation do not exceed upon
consolidation at least two of three limit values of the criteria
referred to in this Paragraph on the balance sheet date of the
parent undertaking of the group of companies:
1) balance sheet total - EUR 4 000 000;
2) net turnover total - EUR 8 000 000;
3) average number of employees during the reporting year -
50.
(3) A medium-sized group of companies is such group of
companies, which is not a small group of companies and whose
undertakings (as an aggregate) to be involved in the
consolidation according to annual statements of the undertakings
to be involved in the consolidation do not exceed upon
consolidation at least two of three limit values of the criteria
referred to in this Paragraph on the balance sheet date of the
parent undertaking of the group of companies:
1) balance sheet total - EUR 20 000 000;
2) net turnover total - EUR 40 000 000;
3) average number of employees during the reporting year -
250.
(4) A large group of companies is such group of companies,
whose undertakings (as an aggregate) to be involved in the
consolidation according to annual statements of the undertakings
to be involved in the consolidation exceed upon consolidation at
least two of three limit values of the criteria referred to in
Paragraph three of this Section on the balance sheet date of the
parent undertaking of the group of companies.
(5) If a group of companies on the balance sheet date of the
parent undertaking thereof exceeds upon consolidation two of the
limit values of criteria referred to in Paragraph two or three of
this Section two years in succession (in both, current and
previous reporting year), the parent undertaking of the group of
companies shall lose the right to apply the reliefs or exemptions
laid down in this Law, which are provided for the relevant
category of groups of companies. If a group of companies on the
balance sheet date of the parent undertaking thereof does not
exceed upon consolidation two of the limit values of the criteria
referred to in Paragraph two or three of this Section two years
in succession (in both, current and previous reporting year), the
parent undertaking of the group of companies shall acquire the
right to apply the reliefs or exemptions laid down in this Law
which are provided for the relevant category of the groups of
companies.
(6) A (new) parent undertaking of the group of companies that
has been established in the reporting year is entitled to apply
the reliefs or exemptions for the relevant category of group of
companies laid down in this Law in the first reporting year, if
the undertakings (as an aggregate) to be involved in the
consolidation according to annual statements of all
aforementioned undertakings do not exceed upon consolidation at
least two of three limit values of the criteria referred to in
Paragraph two or three of this Section for the relevant group of
companies on the balance sheet date of the parent undertaking of
the group of companies.
[7 December 2017]
Section 7. Special Provisions
Regarding Criteria
(1) The criterion "Balance sheet total" is the total of all
items of the asset of the balance sheet scheme indicated in Annex
1 to this Law.
(2) The criterion "Net turnover" is the revenue amount
indicated in the item "Net turnover" of the profit or loss
account scheme indicated in Annex 2 or 3 to this Law.
(3) In exceptional case, if there is no amount in the item
"Net turnover" of the profit or loss account of the undertaking
or it is insignificant, but the revenue amount included in other
items of the profit or loss account is significant, the criterion
"Revenue total" shall be used instead of the criterion "Net
turnover", which is calculated by taking into account also those
revenue amount indicated in all other items of the profit or loss
account.
(4) The average number of employees shall be calculated by
counting the employees employed in the undertaking (for a group
of companies - in the companies to be involved in the
consolidation) on the last date of each month of the reporting
year and dividing the sum by the number of months in the
reporting year.
(5) In order to determine a category of the group of companies
when exclusion referred to in Section 73, Paragraph one, Clauses
3 and 4 of this Law is not carried out, limit values of the
criteria referred to in Section 6, Paragraphs two and three of
this Law "Balance sheet total" and "Net turnover" shall be
increased by 20 per cent.
Chapter
III
Annual Statement and Financial Statement
Section 8. Obligation to Prepare an
Annual Statement and Content of the Annual Statement
(1) An undertaking has an obligation to prepare an annual
statement on each reporting year within the meaning of the
Accounting Law.
(2) The annual statement, as a unified whole, shall consist of
a financial statement and a management report.
[11 November 2021]
Section 9. Content of a Financial
Statement
(1) A financial statement for a small undertaking shall
consist at least from a balance sheet, a profit or loss account,
and an annex to the financial statement.
(2) A financial statement for a medium-sized and large
undertaking shall consist of a balance sheet, a profit or loss
account, a cash flow statement, a statement of changes in equity,
and an annex to the financial statement.
(3) A balance sheet is a part of the financial statement in
which the balance of undertaking funds and sources thereof
(assets and liabilities) on the balance sheet date shall be
indicated. Funds shall be indicated in assets of the balance
sheet, but sources thereof - in liabilities of the balance sheet.
Total assets of the balance sheet shall be equal to total
liabilities of the balance sheet.
(4) A profit or loss account is a part of the financial
statement in which revenue and costs of the undertaking, as well
as profit gained or losses arisen during the reporting year, are
indicated.
(5) Annex to a financial statement is a part of the financial
statement where the undertaking provides explanations,
comparisons, details, and substantiations in relation to the
information indicated in other parts of the financial statement,
as well as additional information which is necessary for the
provision of true and clear view within the meaning of Section
13, Paragraph two of this Law.
Section 10. Schemes for Parts of a
Financial Statement and Change Thereof
(1) A balance sheet shall be prepared on the basis of the
scheme laid down in Annex 1 to this Law.
(2) A profit or loss account shall be prepared on the basis of
the scheme laid down in Annex 2 or 3 to this Law.
(3) A cash flow statement shall be prepared on the basis of
the scheme laid down in Annex 4 or 5 to this Law.
(4) A statement of changes in equity shall be prepared on the
basis of the scheme laid down in Annex 6 to this Law.
(5) A scheme used for preparation of a profit or loss
calculation, as well as for a cash flow statement, may not be
changed in comparison to the previous reporting year (the
relevant part of the financial statement shall be prepared
according to the same scheme for two reporting years in
succession).
(6) In exceptional cases the requirements of Paragraph five of
this Section may be not applied, if the change of the scheme for
a relevant part of the financial statement is provision of true
and fair view in conformity with the provisions of Section 13,
Paragraph two of this Law. Indication shall be given regarding
the change of the scheme for a relevant part of the financial
statement in annex to the financial statement and a reason for
such change shall be explained.
Section 11. General Conditions for
Indication of Items for Parts of a Financial Statement
(1) The balance sheet items laid down in Annex 1 to this Law,
the items for scheme of a profit or loss account laid down in
Annexes 2 and 3, the cash flow statement items laid down in
Annexes 4 and 5, and the items of a statement of changes in
equity laid down in Annex 6 (hereinafter in this Chapter -
items), in preparing the relevant part of the financial
statement, shall be indicated each separately in the order laid
down for the relevant scheme.
(2) Companies, in preparing the relevant part of the financial
statement, within the framework of the relevant scheme are
allowed to join those items in schemes which are designated with
Arabic figures, if their amounts are insignificant for the
provision of true and fair view in conformity with the provisions
of Section 13, Paragraph two of this Law or if such joining
provides greater clarity. Details on joined items shall be
provided in Annex to the financial statement.
(3) When preparing the relevant part of the financial
statement, an undertaking which prepares the financial statement
in accordance with international accounting standards is
entitled, within the framework of the relevant scheme, to
subdivide those items which are designated with Arabic figures or
to add a new item accordingly designated with an Arabic figure or
a letter, if the indication of such item in the relevant part of
the financial statement is stipulated by a certain requirement
laid down in international accounting standards or it is
necessary for the provision of a true and fair view and if the
content of the referred to item is not covered in any of the
relevant scheme items. When preparing the relevant part of the
financial statement, an undertaking which prepares the financial
statement in accordance with the provisions laid down in this
Law, is allowed, within the framework of the relevant scheme, to
subdivide those items which are designated with Arabic figures or
to add a new item accordingly designated with an Arabic figure or
a letter, if it is necessary for the provision of a true and fair
view and if the content of the referred to item is not covered in
any of the relevant scheme items.
[7 December 2017 / See Paragraph 8 of Transitional
Provisions]
Section 12. Figures of the Previous
Reporting Year
(1) In preparing a balance sheet, a profit or loss account, a
cash flow statement, and a statement of changes in equity, the
respective figures for the current year and also from the
previous reporting year shall be indicated for each item.
(2) If in the reporting year significant mistakes from the
previous years are discovered or the accounting policy has been
changed, the relevant figure of the previous reporting year shall
be adjusted.
(3) For each case where the figures have not been mutually
comparable or the adjustment of figures of the previous reporting
years has been performed, an explanation shall be provided in the
annex to the financial statement.
(4) An item, in which there is no figure, shall be indicated
only if there was a relevant item with a figure in the previous
financial year.
Chapter
IV
General Conditions for Preparing a Financial Statement
Section 13. True and Fair View
(1) A financial statement shall be prepared understandably and
in conformity with the Accounting Law, this Law and other laws
and regulations governing accounting and annual statements.
(2) A financial statement must provide true and fair view
regarding the funds (assets) of an undertaking, liabilities,
financial position and profit or losses thereof, but an annual
statement of a medium-sized undertaking and large undertaking -
also regarding cash flow.
(3) If the information included in the financial statement
prepared in accordance with this Law does not provide a
sufficiently true and fair view of the undertaking, additional
information shall be provided in annex to the financial
statement.
(4) In the exceptional cases referred to in Paragraph five of
this Section the undertaking has the right to derogate from the
principles and provisions for recognition, assessment, and
indication of the items of the financial statement laid down in
this Law, if the application thereof does not provide true and
fair view within the meaning of Paragraph two of this Section.
Every such derogation shall be explained in annex to the
financial statement, indicating the reason for and the effect of
the abovementioned derogation on the funds (assets), liabilities,
financial position, and profit or loss of the undertaking. The
particular norm of this Law shall be indicated in annex to the
financial statement, from the application of which the
undertaking has derogated, and the requirement of the relevant
law or regulation or international accounting standard which the
undertaking has applied.
(5) The exceptional cases referred to in Paragraph four of
this Section are as follows:
1) the undertaking fails to comply with the principle for
continuing the activity laid down in Section 14, Paragraph one,
Clause 1 of this Law and due to this reason the general principle
laid down in Section 14, Paragraph one, Clause 10 of this Law
regarding assessment of financial statement items in conformity
with the purchase costs or production cost price cannot be
applied;
2) due to justified reasons (for example, if an undertaking
the transferable securities of which are admitted on the
regulated market is a parent undertaking of the group of
companies and draws up a consolidated annual statement in
accordance with the requirements of the international accounting
standards or if an undertaking is a subsidiary of such group of
companies whose parent undertaking requires to use the
international accounting standards for the recognition,
assessment, indication of items in the financial statement and
for the provision of explanatory information) the undertaking
recognises, assesses, indicates investment properties, biological
assets, long-term investments held for sale, deferred tax assets,
deferred tax liabilities, or other items of assets or liabilities
of the balance sheet in the financial statement and provides
explanatory information regarding these items in accordance with
the international accounting standards.
(6) For the purpose of application of this Law:
1) investment properties are immovable property objects -
parcels of land, buildings, engineering structures, groups of
premises, and undivided shares of the abovementioned objects,
which an undertaking holds as an owner or as a lessee according
to a financial lease in order to acquire a lease (rent) payment
or to await a rise in prices (increase in value), but not in
order to use for the manufacture of goods, provision of services,
administrative purposes (for the administrative needs of the
undertaking) or to sell in the course of regular economic
activity;
2) biological assets are draft or productive animals or
plants, which the undertaking holds in order to acquire
agricultural products for sale or additional biological
assets;
3) long-term investments held for sale are objects of fixed
assets or intangible investments, the balance sheet value of
which will be recovered from a sale transaction, not from further
use thereof;
4) deferred tax assets are amounts of enterprise income tax,
which are to be recovered during the next reporting years and
which refer to temporary differences to be deducted between the
value of a balance sheet asset or liability items in the
financial statement and the value of such item for the needs of
calculation of the enterprise income tax;
5) deferred tax liabilities are such amounts of enterprise
income tax which are to be paid during the next reporting years
and which refer to those temporary differences between the value
of a balance sheet asset or liability items in the financial
statement and the value of such item for the needs of calculation
of the enterprise income tax which are subject to such tax.
(7) Paragraphs four, five, and six of this Section shall not
apply to a micro-entity which has chosen to use any of the relief
arrangements and exemptions laid down in Chapter XII of this Law
for preparation of a financial statement, except the case
referred to in Paragraph five, Clause 1 of this Section when a
micro-entity does not comply anymore with the principle for
continuing the activity laid down in Section 14, Paragraph one,
Clause 1 of this Law.
[11 November 2021]
Section 14. General Principles for
Preparation of a Financial Statement
(1) A financial statement shall be prepared in conformity with
the following general principles:
1) it shall be assumed that an undertaking will be operating
also in the future (principle for continuing the activity);
2) the same accounting policy and assessment methods used in
the previous reporting year shall be used;
3) items shall be recognised and assessed in the financial
statement by using the principle of precaution, by especially
taking into account the following conditions:
a) only profit made prior to the balance sheet date shall be
included in the financial statement;
b) all liabilities, as well as foreseeable amounts at risk and
losses that have arisen during the reporting year or previous
years, even if they have become known during the time period
between the balance sheet date and the date when the annual
statements are signed by the person or administration institution
referred to in Section 95 of this Law, shall be taken into
account;
c) all decrease in value and depreciation amounts of assets
shall be calculated and taken into account regardless of whether
the reporting year has closed with a profit or a loss;
4) amounts in the balance sheet and the profit or loss account
shall be indicated according to the accumulation principle,
namely, revenue and expenses shall be indicated by taking into
account the time of incurring thereof, not the time of receipt or
spending of money. Revenue and expenses related to the reporting
year shall be indicated regardless of the date of payment or
receipt of invoice;
5) costs shall be coordinated with revenue for the respective
financial periods;
6) except for the case referred to in Section 12, Paragraph
two of this Law, the amounts indicated in the relevant balance
sheet items at the beginning of each reporting year (opening
balances) shall comply with the amount indicated in the same
balance sheet items at the end of the reporting year (closing
balances);
7) asset and liability items of the balance sheet shall be
assessed separately;
8) except the case referred to in Paragraph three of this
Section, any set-off between asset and liability items of the
balance sheet or revenue or expense items of the profit or loss
account is prohibited;
9) the amounts in the profit or loss account items shall be
indicated by taking into account the content and essence of
economic transactions, not only their legal form;
10) the balance sheet and profit or loss account items shall
be assessed in conformity with purchase costs or production cost
price. Purchase costs are purchase price for goods or service
(deducting the discounts received) to which additional expenses
related to the purchase are added. Production cost price is
purchase costs for raw materials, basic materials, and
ancillaries and other expenses which are closely related to the
production of the relevant object. The production cost price may
also include parts of costs, which are indirectly related to the
production of the object, if these costs are applicable to the
same time period.
(2) A relevant financial information, which significantly
affects assessment of users of the annual statement or taking of
decisions, shall be indicated in specific items of a balance
sheet and profit or loss account, but in respect of a
medium-sized and large undertaking - also in specific items of a
cash flow statement and of a statement of changes in equity.
Insignificant amounts, which do not significantly affect the
assessment of users of the annual statement or taking of
decisions, shall be indicated in the abovementioned parts of the
financial statement in the relevant items joining similar
financial information, but details of these amounts shall be
provided in annex to the financial statement.
(3) By derogation from the requirements of Paragraph one,
Clause 8 of this Section, if derived or liquidated long-term
investment object is excluded, the revenue and costs related to
exclusion of the abovementioned object shall be mutually
accounted. In such case the net value shall be indicated in the
profit or loss account - profit or loss from alienation of a
long-term investment object, which is calculated as the
difference between the balance sheet value of the excluded object
and revenue and expenses for alienation or liquidation thereof
provided that gross amounts are indicated in annex to the
financial statement. An undertaking is entitled to specify in the
profit or loss account also the net value of the profit gained or
loss incurred due to fluctuations in foreign currency exchange
rates calculated as the difference between revenue and expenses
incurred in the reporting year due to fluctuations in foreign
currency exchange rates.
[7 December 2017]
Section 15. Competence of the
Cabinet in the Field of Annual Statements
(1) In order to ensure a unified understanding regarding items
of a financial statement, the Cabinet shall issue regulations for
the application of the Law, which shall provide for the
following:
1) the procedures for assessment and indicating of financial
support (financial assistance) received from the State, local
governments, foreign countries, European Union, other
international organisations and institutions, donations and gifts
of money or kind in the financial statement;
2) the procedures by which events as of the balance sheet
date, change of the accounting policy, changes in accounting
estimates and corrections of mistakes shall be indicated in the
financial statement;
3) the procedures by which revenue from the sale of goods and
provision of services, transfer of undertaking's assets for the
use to other persons, acquiring revenue from interest, royalties
and dividends, shall be accounted and assessed;
4) the methods for accounting and assessment of fixed assets,
and the procedures for indicating expenses related thereto and
changes in value in the financial statement;
5) the methods for accounting and assessment of draft or
productive animals or plants, and the procedures for indicating
expenses related thereto and changes in value in the financial
statement;
6) the conditions and methods for assessment of the reserves,
debts of debtors, accumulated revenue, accumulated liabilities,
contingent liabilities and contingent assets;
7) the procedures by which an undertaking, which is a
performer of works or a performer of work of another long-term
contract, shall account and assess the revenue and expenses
related to the construction contract or another long-term
contract;
8) indication of intangible properties created during research
and development measures, which fail to comply with the
classification conditions for intangible investments, in the
financial statement, providing specific examples;
9) the methods for accounting and assessment of stocks, and
the procedures for indicating expenses related thereto and
changes in value in the financial statement;
10) the procedures for assessment and indicating of financial
lease and operating lease transactions in the financial
statement;
11) the procedures for indicating equity items by individual
undertakings, farming and fishing enterprises in the financial
statement;
12) the procedures for preparation of a financial statement by
an undertaking, which fails to comply with the principle for
continuing the activity laid down in Section 14, Paragraph one,
Clause 1 of this Law;
13) the procedures for preparation of a financial statement
regarding a time period which is less than a reporting year
(interim period statement).
(2) The Cabinet shall issue regulations regarding
re-classification of investment properties, biological assets, or
long-term investments held for sale and further indication
thereof in the balance sheet in case when an undertaking
discontinues assessment of the relevant property objects on the
basis of fair value thereof.
(3) The Cabinet shall issue regulations regarding the
electronic true copy form of financial statements or consolidated
financial statements (if any) prepared by undertakings for
inclusion in the Electronic Declaration System of the State
Revenue Service and also shall determine cases where financial
statements or consolidated financial statements (if any) or any
part thereof are submitted in the form of an electronic copy.
[7 December 2017]
Chapter V
Balance Sheet
Section 16. General Conditions for
Indicating Amounts of Balance Sheet Asset Objects, Debts of
Debtors, and Liabilities of Creditors
(1) Long-term investments are assets which are intended for
long use (more than 12 months after the end of the relevant
reporting year) or invested in a long-term property. Other assets
are current assets.
(2) A specific asset object shall be indicated in the
composition of long-term investments or current assets in the
balance sheet depending on the purpose for which it is
intended.
(3) Amounts receivable within one year, and amounts receivable
later than within one year, after the balance sheet date, shall
be indicated separately for each item of liabilities of debtors
in the balance sheet.
(4) Particular amounts of liabilities shall be indicated in
the composition of long-term creditors and short-term creditors
in the balance sheet depending on the due date for payment of a
debt or covering of liabilities. Composition of long-term
creditors shall include those amounts of liabilities, the payment
of which is due more than 12 months after the end of the
respective reporting year, and which are created in order to
finance long-term investments and current assets or in order to
cover obligations, and which are not to be included in
composition of short-term creditors. Composition of short-term
creditors shall include amounts that are payable within the
nearest 12 months after the end of the reporting year, and other
liabilities, which arise in the regular cycle of activity of the
undertaking.
(5) If any object of assets or any liabilities refer to
several balance sheet scheme items, belonging thereof to other
items shall be indicated under the item where it is included, or
in annex to the financial statement.
Section 17. Next Period Costs and
Revenue
(1) Payments made before the balance sheet date but referring
to the next reporting years shall be indicated in the item "Next
period costs".
(2) Payments received before the balance sheet date but
referring to the next reporting years or further reporting years
shall be indicated in the balance sheet item "Next period
revenue".
Section 18. Own Stocks or Shares and
Participation in Other Undertakings
(1) An undertaking shall indicate the acquired own stocks or
shares in the balance sheet item "Own stocks and shares", but
participation in the subsidiaries of a group of companies or the
parent undertaking of a group of companies, or in other
subsidiary of such a group of companies, or in the equity capital
of a subsidiary of the subsidiary of such group of companies
shall indicate in the balance sheet item "Participation in the
capital of affiliated undertakings".
(2) The undertaking shall indicate the acquired participation
in the equity capital of the associated undertaking in the
balance sheet item "Participation in the capital of associated
undertakings", but other participation in the equity capital of
another undertaking shall be indicated in the balance sheet item
"Other securities and investments".
(3) Participation of an undertaking in the capital of another
undertaking (hereinafter - the participation of capital) is the
right of such undertaking to a capital share of another
undertaking (regardless of whether such right is or not certified
with a participation certificate). The purpose of a capital
participation is to promote activity of the undertaking by
creating a continued link with another undertaking. The
participation of capital in the capital of another undertaking is
as follows:
1) participation in the capital of an affiliated undertaking,
if the undertaking has acquired for more than 50 per cent of
stocks or capital shares (for a co-operative company -
co-operative share) of another undertaking;
2) participation in the capital of an associated undertaking,
if the undertaking has acquired not less than 20 per cent but not
more than 50 per cent of stocks or capital shares (for a
co-operative company - co-operative share) of another
undertaking.
Section 19. Immovable Property
Objects and Share Premium Account
(1) An undertaking shall indicate the acquired immovable
property objects (land parcels, buildings, engineering
structures, groups of premises, and undivided shares of the
abovementioned objects) in the balance sheet item "Land parcels,
buildings and engineering structures".
(2) If stocks or shares of new issue have been sold for a
larger amount than the nominal value, the difference shall be
indicated in the item "Share premium account" of the balance
sheet liability section "Equity". If stocks or shares of new
issue have been sold for an amount below the nominal value, the
difference shall be indicated in the same item as a negative
number.
Section 20. Profit or Loss Sum
In the balance sheet item "Profit or loss for the reporting
year", the amount shall be indicated, which corresponds to the
amount indicated in the profit or loss item "Profit or loss of
the reporting year". The profit distribution or coverage of
losses of an undertaking shall be indicated in the accounts for
the following year, correspondingly decreasing the amount
indicated at the beginning of the reporting year in the item
"Retained profits for the previous year".
Section 21. Items Expressed in
Foreign Currencies
Balances of foreign currency (for example, cash in the
undertaking's cashier, non-cash in current accounts or sight
deposit accounts), balances of fixed-term deposits of foreign
currency and balances of advances, loans, or borrowings expressed
in foreign currencies, as well as other balances of debtors or
creditors which are receivable or payable in foreign currencies,
shall be indicated in the balance sheet by re-calculating them in
euro according to the foreign currency rate to be used in the
accounting which is in effect on the balance sheet date (at the
end of the day).
Section 22. Long-term Investments in
Fixed Assets of a Public Partner
If during the term of validity of a public and private
partnership agreement an undertaking carries out long-term
investments in fixed assets of a public partner, which are
transferred to it with the abovementioned agreement, such
undertaking shall indicate the amount of expenses related to the
establishment of the abovementioned long-term investments in the
balance sheet item "Long-term investments in fixed assets of a
public partner".
Section 23. Adjustments of Reduction
in the Value of Long-term Investment Objects
(1) Acquisition costs of a long-term investment object with
limited useful life or production cost price (hereinafter - the
initial value), or the value (if any) determined in revaluation
shall be gradually reduced for this object during the intended
useful life, by deducting therefrom adjustments of reduction in
the value which are calculated in order to carry out a gradual
write-off of the value of such object (for an object of fixed
assets - annual calculation of depreciation, for an intangible
investment object - annual write-off of the value) during the
intended useful life.
(2) Useful life for a land parcel is not limited, therefore
its initial value may not be subjected to the adjustments of
reduction in the value referred to in Paragraph one of this
Section.
(3) If the balance value of a long-term investment object is
lower than its value calculated in accordance with the conditions
of Section 14, Paragraph one, Clause 10 of this Law and Paragraph
one of this Section, and it is expected that reduction in the
value will be continuous, adjustment of reduction in the value
shall be applied to the relevant object, assessing it in
conformity with the lowest value on the balance sheet date
regardless of whether the useful life of such long-term
investment object is or is not limited.
(4) Adjustments of reduction in the value of long-term
investments referred to in Paragraph three of this Section shall
be included in a profit or loss account and explained separately
in annex to the financial statement, if they are not separately
indicated in the profit or loss account.
(5) Adjustments of reduction in the value of long-term
investments referred to in Paragraph three of this Section may be
discontinued, if reduction in the value ceases to have a
justification. This provision shall not apply to the adjustments
of reduction in the value, which are applied to intangible value,
namely, these adjustments of reduction in the value are not
revocable.
Section 24. Adjustments of Reduction
in the Value of Current Assets
The value of current assets shall be adjusted in order for
them to be assessed in conformity with acquisition costs or
production cost price on the balance sheet date, or the lowest
market prices on this date whichever of these indicators is
lower, or in special cases - with other lowest value (for
example, debts of debtors, receipt of which is doubted, shall be
assessed according to the net value, damaged or outdated stock
units and stock units for which production completion or sale
costs significantly increase, shall be assessed according to the
net sales value). Adjustments of reduction in the value of
current assets referred to in this Section may be discontinued,
if reduction in the value ceases to have a justification.
Section 25. Assessment of Stocks
(1) The acquisition costs or production cost price of stocks
may be determined as the weighted average price or by using the
"First in - first out" method (FIFO).
(2) The "First in - first out" method (FIFO) is a method for
determination of utilisation of stocks and value of balances,
which is based on the assumption that stock units which have been
purchased or produced first are sold or utilised first. Therefore
those stock units which are in balance at the end of the
financial period are those which have been purchased or produced
the last.
(3) The weighted average price method is a method for
determination of utilisation of stocks and value of balances, by
the application of which the costs for a stock unit are
determined on the basis of weighted average costs of similar
stock units at the beginning of the financial period and costs of
similar stock units purchased or produced during the financial
period.
(4) An undertaking shall use the same method for determination
of utilisation and balance value of stocks for all stocks of
similar type and use.
Section 26. Assessment of
Replaceable Transferable Securities
The value of replaceable transferable securities included in
long-term financial investments may be determined as the weighted
average price or by using the "First in - first out" method
(FIFO).
Section 27. Difference between the
Loan Amount to be Repaid and Received
(1) If the loan amount to be repaid is larger than the amount
received, the difference shall be indicated in annex to the
financial statement.
(2) The difference referred to in Paragraph one of this
Section shall be included in expenses gradually, by dividing into
years, not later than by the due date for repayment of the debt,
increasing the amount of liabilities accordingly until it reaches
the loan amount to the repaid.
Section 28. Inclusion of Loan
Interest
The loan interest received for the establishment of long-term
investments or current assets, insofar as it refers to the
establishment time period, may be included in production cost
price of the relevant newly established objects. An undertaking
shall provide data in annex to the financial statement regarding
the cases of application of this provision, indicating the amount
of interest included in the production cost price.
Section 29. Establishment of
Intangible Investments Items
(1) Expenses for establishment of an undertaking and research
expenses may not be included in the balance sheet (capitalised).
They shall be written off in expenses of the reporting year when
they have incurred.
(2) Only rights acquired in exchange for consideration may be
indicated in the item "Concessions, patents, licenses,
trademarks, and similar rights".
(3) Expenses related to the acquisition of an undertaking may
be indicated in the item "Intangible value", if they cannot be
referred to other items of the balance sheet asset, moreover,
only in such amount in which intangible value was acquired for
consideration.
Section 30. Capitalisation of
Development Costs and Limitation of Profit Distribution
Development costs may be included in the balance sheet
(capitalised) provided that while the initial value of the object
of development costs is not completely written-off, profit
distribution shall not take place unless reserves available for
distribution and undistributed profit amount of previous years is
at least equivalent to the amount of the initial value of
development costs not written off.
Section 31. Write-off of Value of
Intangible Investment Items
(1) The initial value of the object of intangible investments
shall be written off by carrying out adjustments of reduction in
the value referred to in Section 23, Paragraph one of this Law -
annual write-off of the value of intangible investments during
useful life of such object.
(2) In exceptional case, if it is not possible to credibly
estimate the useful life of the object of intangible value or
development costs, their initial value shall be written off
gradually, dividing by years during the time period which does
not exceed 10 years. Each such exceptional case shall be
explained in annex to the financial statement, indicating
duration of the time period in which it is intended to write off
the initial value of the relevant item.
Section 32. Creation of Reserves and
Assessment Thereof
(1) Reserves are intended in order to cover liabilities, the
essence of which is clearly determined and which may be foreseen
or are known or will definitely occur on the balance sheet date,
however, the extent of the amount necessary for covering of such
liabilities or the date of occurrence of such liabilities may
change.
(2) An undertaking may establish reserves in order to cover
expenses, if the essence of such expenses is clearly determined
and occurrence thereof may be foreseen or is known or will
definitely occur on the balance sheet date, however, the extent
of the amount necessary for covering of such expenses or the date
of occurrence of such expenses may change.
(3) Reserves shall be assessed according to the most accurate
accounting estimate regarding the amount which is necessary on
the balance sheet date in order to cover the liabilities referred
to in Paragraph one of this Section or the expenses referred to
in Paragraph two of this Section which may arise.
(4) Reserves may not be used for adjustment of the value of
assets.
Chapter
VI
Alternative Possibilities for Assessment of Balance Items
Section 33. Revaluation of Fixed
Assets and Establishment of Reserve
(1) By derogation from Section 14, Paragraph one, Clause 10 of
this Law, a fixed assets object, the value of which is
significantly higher than the costs of its acquisition or
production cost price or assessment on the balance sheet of the
previous year, may be revalued according to its higher value, if
it may be assumed that the value increase will be long-term.
(2) A difference arisen as a result of such revaluation
between assessment, which was carried out on the basis of
acquisition costs or production cost price, and assessment which
was carried out on the basis of revaluation, if such difference
is positive (hereinafter - increase in value), shall be included
in the relevant assets item of the balance sheet where revalued
object of fixed assets is indicated and in the liabilities item
of the balance sheet "Revaluation reserve of long-term
investments" under the section "Equity". However the sum in the
amount of which increase in the value arisen as a result of
revaluation completely or partly compensates reduction in the
value of the same object of fixed assets, which in previous
reporting years were included in the profit or loss account as
costs, shall not be included in the revaluation reserve of
long-term investments. This sum shall be included in the profit
or loss account as revenue in the reporting year in which
increase in the value of the object of fixed assets was
determined.
(3) Annual depreciation of the object of revalued fixed assets
shall be calculated in the current reporting year on the basis of
the value of such object in the relevant reporting year and
included as the same amounts in the profit or loss account as
costs.
[11 November 2021]
Section 34. Conditions for Reduction
of Revaluation Reserve of Long-term Investments
(1) Revaluation reserve of long-term investments shall be
reduced, if the revalued object of fixed assets is alienated,
liquidated or there is no longer basis for increase in the value
thereof. An undertaking is entitled to reduce the revaluation
reserve also if it calculates the annual depreciation of the
object of revalued fixed assets. Reduction of revaluation reserve
shall be included in the profit or loss account as revenue in the
reporting year in which such reduction is carried out.
(2) Revaluation reserve of long-term investments shall only be
reduced in the cases specified in Paragraph one of this Section.
Revaluation reserve of long-term investments may not be
disbursed, divided in dividends or used for covering of losses,
increase of the equity, establishment of other reserves, or for
other purposes.
[7 December 2017]
Section 35. Assessment of Financial
Instruments in Fair Value
(1) By derogation from the assessment provisions provided for
in Section 14, Paragraph one, Clause 10 of this Law, financial
instruments (also derivative financial instruments) may be
assessed in fair value, if the conditions included in Paragraphs
two, three, and four of this Section are observed.
(2) Within the meaning of this Law contracts, for which the
basic assets are goods and according to which both parties have
the right to settle in cash or with some other financial
instrument, are derivative financial instruments, except the case
where all of the following conditions are in effect:
1) the contract has been entered into according to the planned
needs of procurement, sale, or utilisation of goods, raw
materials, basic materials, and ancillary materials by the
undertaking and still conforms thereto;
2) the contract already initially was intended for the needs
referred to in Clause 1 of this Paragraph;
3) the settlement of the contractual obligations is intended
with the supply of goods.
(3) Assessment of the fair value shall be applied only to such
financial commitments, which are an integral part of the trade
portfolio or which have arisen from derivative financial
instruments. Trade portfolio is the aggregate of financial
instrument items held in the name of the undertaking and for the
benefit of the undertaking (also contracts whose basic assets are
goods), which the undertaking holds for trade or acquires in
order to obtain a profit in the near future from the actual or
expected purchase and sale price difference or other price or
interest rate changes, as well as items which are acquired by the
undertaking in order to limit the trade portfolio item risks.
(4) In addition to that laid down in Paragraph one of this
Section, any financial asset or financial commitment item may be
assessed in fair value, which is qualified as a risk insured
item, or also a specified part of such item, if it is necessary
according to the accepted risk limitation accounting system of
the undertaking. A risk limitation accounting system is the
indicating of one or several risk limitation instruments
(derivative financial instruments, other financial assets or
financial commitments) for the purpose of risk limitation
accounting so that the change in the fair value of such
instruments would completely or partially compensate the change
in the fair value or cash flow of the risk insured item.
Section 36. Financial Assets which
are not Subject to Measurement Basis of Fair Value
(1) The following financial assets shall not be subject to
measurement basis of fair value:
1) investments held to the end of term, which are not
derivative financial instruments;
2) loans and debtor debts, which are not held for trade;
3) participation in equity of subsidiaries of the group of
companies, associated undertakings and jointly controlled
undertakings, capital securities issued by the undertaking, as
well as other financial instruments which, in conformity with the
international accounting standards, are not subject to
measurement basis of fair value.
(2) Investments held until the end of the term are
non-derivative financial assets with fixed or determinable
payment schedule and fixed term in respect of which the
undertaking has commitments and possibilities to hold them until
the end of the term, except for such financial assets:
1) which have been initially classified by the undertaking for
measurement basis of fair value with inclusion of changes in the
value in profit or loss;
2) which are accounted by the undertaking as available for
sale;
3) which are loans and debts of debtors.
(3) Loans and debts of debtors are non-derivative financial
assets with fixed or determinable payment schedule which are not
quoted in the active public securities market, except for such
financial assets:
1) which are intended to be sold by the undertaking
immediately or in the nearest future and which are included in
such category of financial assets, which are intended for trade,
as well as those which have been initially classified by the
undertaking for measurement basis of fair value with inclusion of
changes in the value in profit or loss;
2) which are accounted by the undertaking as available for
sale;
3) the significant part of initial investments of which cannot
possible be recovered by the owner due to different reasons,
except cases when decline in credit situation has occurred, and
which therefore are to be classified as financial assets
available for sale.
(4) Financial assets shall not be classified as investments
held until the end of the term, if the undertaking has sold or
re-classified more than non-significant part of financial assets
during the reporting year or two previous reporting years, which
were classified as investments held until the end of the term, in
comparison to the total sum of investments held until the end of
the term, except such sold or re-classified investments
which:
1) are so close to the end of the term or date of deleting of
the financial asset (for example, almost three months before the
end of the term), that changes to the market interest rate do not
significantly influence the fair value of the financial
instrument;
2) are incurred after the undertaking has collected the part
of initial principal amount of the item of all significant
assets, using a payment schedule or prepayment;
3) are referred to a separate case which is outside the limits
of control possibilities of the undertaking, which does not
repeat and which could not have been foreseen in the
undertaking.
Section 37. Value Determination
Methods of Financial Instruments
(1) The measurement basis of fair value of financial
instruments in the cases referred to in Section 35 of this Law
must be credible. A measurement basis is credible if the fair
value of the financial instrument is determined using one of the
following methods:
1) for financial instruments, for which price quotations have
been published in the active public securities market - on the
basis of the market price. If the financial instrument does not
have the abovementioned market price, but such price is for its
separate components or similar financial instruments, such
instrument market price may be established, taking into account
the market price of its components or similar financial
instruments;
2) for financial instruments, for which it is not possible to
specify the market price - on the basis of the value, calculated
using generally known and applicable assessment models and
methods, if the calculated value acceptably reflects the possible
market price of such instruments.
(2) Financial instruments, the fair value of which cannot be
credibly determined with the methods referred to in Paragraph one
of this Section, shall be assessed in accordance with the
procedures laid down in Section 14, Paragraph one, Clause 10 of
this Law, insofar as such assessment is possible.
Section 38. Changes in the Fair
Value of Financial Instruments
(1) Changes in the fair value of a financial instrument, which
have occurred in performing assessment in accordance with the
methods laid down in Section 37, Paragraph one of this Law, shall
be included in the profit or loss account, except the following
cases:
1) the financial instrument is qualified as a risk limitation
instrument, and according to the risk limitation accounting
system accepted by the undertaking it is intended that some or
all of the changes in the value of such instrument need not be
reflected in the profit or loss account;
2) the changes in the value of the financial instrument depend
on the changes in the exchange rate associated with the long-term
cash investment of the undertaking in the equity of an
undertaking under foreign jurisdiction. In both of the
abovementioned cases, the changes in the fair value of the
financial instruments shall be indicated in the balance sheet
item "Fair value reserve of financial instruments".
(2) The undertaking shall indicate changes in the fair value
of financial assets available for sale if such assets are not
derivative financial instruments, in the balance sheet item "Fair
value reserve of financial instruments".
(3) Within the meaning of this Chapter financial assets
available for sale are such non-derivative assets which are
accounted as available for sale or which are not classified as
loans and debts of debtors, investments held until the end of
term or such financial assets, which have been classified by the
undertaking for measurement basis of fair value with inclusion of
changes in the value in profit or loss.
Section 39. Conditions for Reducing
the Fair Value Reserve of Financial Instruments
(1) The fair value reserve of financial instruments, which is
shown in the balance sheet item "Fair value reserve of financial
instruments", shall be decreased by including it in a profit or
loss account for the same reporting year in which the relevant
financial instrument is sold, extinguished or alienated in some
other way or also in which the value of the financial asset has
reduced.
(2) The fair value reserve of financial instruments shall only
be decreased in the cases laid down in Paragraph one of this
Section. The fair value reserve of financial instruments may not
be disbursed, divided in dividends or used for covering of
losses, increase of equity, establishment of other reserves or
for other purposes.
Section 40. Application of
International Accounting Standards to Assessment of Financial
Instruments
By derogation from the provisions provided for in Sections 35,
36, 37, 38, and 39 of this Law, the relevant financial
instruments may be recognised, assessed, indicated in the
financial statement and explanatory information may be provided
thereon according to international accounting standards.
Chapter
VII
Profit or Loss Account
Section 41. Net Turnover and Other
Revenue from Economic Activity
(1) Net turnover is revenue from the sale of produce or goods
and provision of services, from which trade discounts and other
allocated discounts, as well as value added tax and other taxes
directly related to turnover, have been deducted.
(2) Different other revenue (for example, profit gained from
alienation of long-term investment objects or from fluctuations
in currency exchange rates, revenue from insurance compensations
received, from financial assistance or financial aid received),
other than indicated in the item "Net turnover" or in other
relevant revenue items and which have arisen as a result of
economic activity or arising therefrom, shall be indicated in the
item "Other revenue from economic activity".
Section 42. Selling and
Administrative Costs
(1) The relevant part from staff costs, material costs,
adjustments of reduction in the value of fixed assets and
intangible investments and other costs of economic activity,
which refer to the reporting year, shall be included in the items
"Selling costs" and "Administrative costs".
(2) The part from the costs indicated in Paragraph one of this
Section, which have arisen during the course of sale,
transportation, or storage of produce or goods, or which are
necessary to promote the sale of goods and services, shall be
indicated in the item "Selling costs".
(3) The part of costs indicated in Paragraph one of this
Section, which have arisen during the financial period in the
course of management, control, and administration of the
undertaking, shall be indicated in the item "Administrative
costs".
Section 43. Other Items of Revenue
and Expenses
(1) Revenue from transfer of assets of the undertaking for use
to other persons shall be indicated in the following items of
profit or loss account:
1) revenue from long-term financial investments in equity of
other undertakings (hereinafter - dividends) shall be indicated
in the item "Revenue from participation", separately indicating
those dividends which are received from participation in the
capital of related undertakings, and those dividends which are
received from participation in the associated undertakings and
other undertakings;
2) revenue from long-term deposits, loans, securities, and
other long-term debtors (hereinafter - interest from long-term
financial investments) shall be indicated in the item "Revenue
from other securities and loans which formed long-term financial
investments", separately indicating the interest received from
related undertakings and the interest received from associated
undertakings and other undertakings;
3) revenue from short-term loans and claims (for example,
interest), as well as royalties (for example, regarding transfer
of patents, trademarks, copyrights and the rights of use of
computer software) shall be indicated in the item "Other revenue
from interest and similar revenue", separately indicating revenue
received from related undertakings and revenue received from
other persons.
(2) Acquisition costs of the goods sold for obtaining of net
turnover and production cost price of services provided shall be
indicated in the item "Production cost price of produce sold,
purchase costs for goods sold or services provided".
(3) Costs of economic activity other than indicated in other
items of profit or loss account and which have arisen as a result
of economic activity or are related thereto, or directly arise
therefrom (for example, losses caused by alienation of long-term
investment objects or fluctuations in currency exchange rate)
shall be included in the item "Other costs of economic
activity".
(4) The amounts to be indicated in the item "Changes in stocks
of finished goods and unfinished products", if the undertaking
prepares a profit or loss account according to the scheme
indicated in Annex 2 to this Law, and in the items "Production
cost price of produce sold, purchase costs for goods sold or
services provided", "Selling costs" and "Administrative costs",
if the undertaking prepares a profit or loss account according to
the scheme indicated in Annex 3 to this Law, shall be determined
according to cost price calculations corresponding to
peculiarities of the undertaking, in which the relevant part of
material costs, staff costs, adjustments of decrease in the value
of fixed assets, intangible investments, and current assets and
other costs shall be included.
Section 44. Extraordinary
Dividends
(1) If an undertaking has calculated extraordinary dividends
in the reporting year within the meaning of the Commercial Law,
then the calculated amount of extraordinary dividends shall be
indicated in the items of the profit or loss calculation in
accordance with Paragraph two or three of this Section at the end
of the reporting year.
(2) If the profit amount indicated in the item "Profit or loss
after calculation of the enterprise income tax" is equal with or
exceeds the amount of extraordinary dividends calculated in the
reporting year, then the abovementioned amount shall be indicated
in the item "Extraordinary dividends".
(3) If the profit amount indicated in the item "Profit or loss
after calculation of the enterprise income tax" is less than the
amount of extraordinary dividends calculated in the reporting
year, as well as if the losses are indicated in this item, the
part of extraordinary dividends excess over the abovementioned
profit amount, but in the case of losses - the entire amount of
calculated extraordinary dividends shall be indicated in the item
"Other costs of economic activity".
Chapter
VIII
Cash Flow Statement
Section 45. Content of a Cash Flow
Statement
(1) A cash flow statement is a component of financial
statements, in the items of which cash flows arisen from the
principal activity, investment activity and from financing
activity of the undertaking, as well as increase or decrease of
cash and its equivalents, and balances, is indicated
separately.
(2) Cash flow of principal activity is cash revenue, payments,
and expenses other than arisen from investment activity or
financing activity.
(3) Investment activity cash flow is such cash flow, which
arises in relation to acquisition and alienation of long-term
investments (for example, fixed assets, investment properties,
intangible investments, long-term financial investments) and
investments other than cash equivalents.
(4) Financing activity cash flow is such cash flow, which
causes changes in the amount and composition of equity and
borrowings of the undertaking.
(5) Money is cash in the cashier of the undertaking and
non-cash payments in current accounts and sight deposit
accounts.
(6) Money equivalents are short-term investments, which may be
turned into money within a short period of time and there is a
small chance that their value will significantly change (for
example, such short-term investments, the remaining time period
of which until deleting and repurchase thereof is three months or
less counting from the date of acquisition).
Section 46. General Conditions for
Preparing a Cash Flow Statement
(1) If the scheme indicated in Annex 4 to this Law is used for
the preparation of a cash flow statement, the principal activity
cash flow shall be determined by applying direct method. By this
method information regarding cash flow in division by items
included in the scheme shall be acquired directly from the
accounting register data of the undertaking, analysing cash and
non-cash operations or adjusting amounts included in the item
"Net turnover", in the item "Production cost price of produce
sold, purchase costs for goods sold or services provided" and in
other items regarding amounts of revenue and expenses other than
related to the cash flow (for example, changes in balances of
stocks and debts of debtors and creditors related to the
principal activity in the reporting year, balances of other
items, which are related to cash flow of investment activity or
financing activity).
(2) If the scheme indicated in Annex 5 to this Law is used for
the preparation of a cash flow statement, the principal activity
cash flow shall be determined by applying indirect method. By
this method the amounts, which are to be indicated in the items
of the cash flow statement, shall be calculated by adjusting the
amount indicated in the item "Profit or loss before the
enterprise income tax" of the profit or loss account accordingly.
If cash revenue, payments or expenses in foreign currencies have
occurred in the reporting year, such influence shall be indicated
separately from the cash flow of the principal activity, cash
flow of the investment activity, and cash flow of the financing
activity in a separate cash flow item "Result of fluctuations in
foreign currency exchange rates".
(3) Cash flows of the principal activity, cash flows of the
investment activity, and cash flow of the financing activity in
division by items included in schemes shall be indicated in gross
amounts (except in the cases referred to in Paragraph two of this
Section).
(4) The difference of received and performed cash payments
shall be indicated in a cash flow statement of the principal
activity, if:
1) cash payment is received and performed on behalf of another
person and it is rather related to activity of that other person
than to the activity of the undertaking (for example, to perform
collection of rent payment and settle accounts with the owner on
behalf of the owner);
2) payment received or performed refers to asset or liability
items of the balance sheet characterised by fast circulation,
large amounts, and short time period for deleting or payment (for
example, acquisition and sale of securities, receipt and
repayment of such borrowings the repayment time period of which
does not exceed three months).
(5) The total amount of the interest paid during the reporting
year shall be indicated in the cash flow statement regardless of
whether such amount is included in the profit or loss account (as
expenses) or in the balance sheet (in the assets value). The
interest paid shall be indicated as cash flow of the principal
activity or as cash flow of the financing activity. The interest
received shall be indicated as cash flow of the principal
activity or as cash flow of the investment activity.
(6) The dividends disbursed shall be indicated as cash flow of
the principal activity or as cash flow of the financing activity.
The dividends received shall be indicated as cash flow of the
principal activity or as cash flow of the investment
activity.
Section 47. Special Conditions for
Certain Items of the Cash Flow Statement
(1) The difference between cash revenue and payments
(expenses) of the principal activity before expenses for interest
payments, enterprise income tax payments, and extraordinary items
shall be indicated in the item "Gross cash flow of the principal
activity". Excess of cash revenue over cash payments and expenses
shall be indicated as a positive figure, but excess of cash
payments and expenses over revenue shall be indicated as a
negative figure.
(2) Excess of cash revenue from the principal activity,
investment activity, or financing activity over cash payments and
expenses, which refer to such direction of the activity, shall be
indicated as a positive figure or excess of payments and expenses
over revenue, which refers to such direction of the activity, as
a negative figure in the items "Net cash flow of the principal
activity", "Net cash flow of the investment activity", and "Net
cash flow of the financing activity" accordingly.
Section 48. Cash Flow in Foreign
Currency
If cash flow is in foreign currency, it shall be re-calculated
from the relevant foreign currency in euros according to the
foreign currency rate to be used in accounting, which is in
effect at the beginning of the day of receiving or making the
payment.
Chapter
IX
Statement of Changes in Equity
Section 49. Content of the Statement
of Changes in Equity
(1) The statement of changes in equity is a component of the
financial statement, which provides data on the equity of an
undertaking and changes in the amounts of its components under
influence of specific economic transactions during the reporting
year, as well as on total profit or loss during this period of
time, including amounts included or written off directly from
equity.
(2) The following shall be indicated regarding the balance
sheet section "Equity" and regarding each its item in the
statement of changes in equity:
1) the figures indicated in the balance sheet of the previous
reporting year - balance value of the balance sheet section
"Equity" and of each item of the section in the balance sheet
date of the previous year (hereinafter - balance value);
2) adjustment of the balance value referred to in Clause 1 of
this Paragraph, if any is made during the reporting year in
relation to changes in the accounting policy or correction of a
mistake in respect of previous years;
3) changes to the balance value referred to in Clause 1 of
this Paragraph in the reporting year in division by the relevant
types of economic transactions, facts, or events;
4) the figures indicated in the balance sheet of the reporting
year - total of the balance sheet section "Equity" and balance
value of each item thereof on the balance sheet date.
Section 50. Changes in Value of
Balances of Equity Items
Changes in value of balances of equity items may arise from
the following economic transactions, facts or events:
1) involvement of additional capital or increase or decrease
of equity [increase or decrease in share premium account of stock
or share capital (equity) and stocks (shares)];
2) revaluation of fixed assets (increase or decrease in the
balance of long-term investment revaluation reserve);
3) changes in fair value, change of classification, sale,
deletion, or alienation in another way of individual financial
instruments or financial assets (increase or decrease in balance
of fair value reserve of financial instruments);
4) establishment of reserves from profit of the previous years
and reserves (if any) of another type, change of classification,
or liquidation thereof, increase, decrease, or use of amounts of
balances transferred into reserves;
5) inclusion of profit or loss of the reporting year in the
balance sheet and changes in the amount of balance of retained
profit of the previous years, including changes in relation to
distribution of profit in dividends, utilisation for covering of
losses of the previous years, increase in fixed capital,
establishment of reserves, or for other purposes.
Chapter X
Annex to the Financial Statement
Section 51. General Conditions for
Preparing Annex to the Financial Statement
The information laid down in this Chapter for the relevant
category of undertakings shall be provided for in annex to the
financial statement. If the case referred to in Section 10, 11,
12, 13, 14, 23, 27, or 28 of this Law applies to a particular
undertaking, the relevant additional information (explanation,
details, or justification) shall be provided for in annex to the
financial statement. Information shall be provided in such order,
in which the items are indicated in the relevant parts of the
financial statement.
Section 52. Content of Annex to the
Financial Statement for All Categories of Undertakings
(1) All undertakings, regardless of the category of
undertakings they belong to, shall provide at least the following
information in annex to the financial statement in addition to
the information laid down in this Law:
1) information regarding the accounting policy adopted and its
conformity with the assumption that the undertaking will operate
also in the future, as well as regarding any significant changes
in the accounting policy adopted and influence of such changes on
the financial statement;
2) the sum total of financial liabilities, guarantees
provided, or other possible liabilities not included in the
balance sheet. If the undertaking has entered into lease or rent
agreements, which are significant for its operations, the
liabilities provided for under these agreements must be specially
indicated. If the undertaking's assets are pledged or encumbered
with another security of liability, information thereof shall be
provided and the type of each security provided shall be
indicated. All liabilities referring to pensions and related or
associated undertakings shall be indicated separately;
3) the amounts of advances, loans, or guarantees issued to the
management in the division by individual position groups (members
of the supervisory board and executive board), indicating the
interest rate, the most important terms and amounts repaid,
written-off and repayable;
4) information regarding revenue and expenses items, which
occurred as a result of events or transactions clearly different
from the usual activities of the undertaking and not expected to
be frequently or periodically repeated, their amounts and type.
Usual activities of an undertaking are any activities, which the
undertaking performs within the framework of its economic
activities, as well as activities, which promote economic
activities of the undertaking, or have developed in relation to
such activities or are directly arising from them;
5) in respect of each item of long-term creditors - the total
amount of debts of creditors, the due date of which exceeds five
years after the balance sheet date, as well as the total amount
of debts of creditors which is covered by security, indicating
the type and form of the security;
6) the average number of employees in the reporting year;
7) the following data shall be indicated in respect of each
item of long-term investments:
a) acquisition costs or production cost price or - in the
relevant case - fair value or value determined in revaluation at
the beginning and end of the reporting year;
b) increases in value, including improvements during the
reporting year;
c) alienation or liquidation during the reporting year;
d) any transfers to another item during the reporting
year;
e) total amount of adjustments of reduction in the value
calculated from the day of acquisition of a long-term investment
object or putting into service (hereinafter - the accrued
adjustments of reduction in the value) at the beginning and end
of the reporting year;
f) the adjustments of reduction in the value calculated during
the reporting year;
g) changes in the total amount of adjustments of reduction in
the value in relation to alienation, liquidation, or movement of
long-term investment objects to another item during the reporting
year;
h) amount of the interest of borrowings included in the
production cost price of long-term investment objects during the
reporting year;
8) information regarding significant events after the balance
sheet date, which are not included in the balance sheet or profit
or loss account.
(2) If fixed assets are assessed as amounts to be revalued by
applying the possibility provided for in Section 33 of this Law,
the table shall be included in annex to the financial statement
in which:
1) changes in the item "Long-term investment revaluation
reserve" are indicated in the reporting year, explaining the
procedures for imposing taxes applicable to the fixed assets to
be revalued;
2) information regarding the value to be indicated in the
balance sheet, if the relevant item would not have been revalued,
is provided in division by items of revalued fixed assets
indicated in the balance sheet.
(3) If financial instruments are assessed in fair value,
applying the possibility provided for in Section 35 of this Law,
the following shall also be included in annex to the financial
statement:
1) the most important assumptions on the basis of which the
assessment model and method used was chosen, if the fair value of
such instruments was determined in accordance with Section 37,
Paragraph one, Clause 2 of this Law;
2) in division by categories of financial instruments in
conformity with the division laid down in the international
accounting standards:
a) fair value of financial instruments;
b) changes in fair value of financial instruments, which are
included in the profit or loss account;
c) changes in the fair value of financial instruments, which
are included in the balance sheet item "Fair value reserve of
financial instruments";
3) in the subdivision by groups of derivative financial
instruments - an explanation regarding such instruments,
indicating total amounts, as well as information regarding
essential provisions and conditions, which may influence in the
future the expected amount of cash flow, the time of creation,
and certainty;
4) a table, which reflects changes in the balance sheet item
"Fair value reserve of financial instruments" in the reporting
year.
Section 53. Additional Information
for Medium-sized and Large Undertakings in Annex to the Financial
Statement
(1) Medium-sized and large undertakings shall also provide the
additional information laid down in this Section in annex to the
financial statement. It is as follows:
1) if the option to apply the assessment of fair value to
financial instruments provided for in Section 35, Paragraph one
of this Law has not been used - an explanation of the amount of
derivative financial instruments and nature by breakdown in
groups of such instruments, indicating the fair value if it can
be determined with one of the methods referred to in Section 37
of this Law;
2) if the reduction in the value provided for in Section 23,
Paragraph three of this Law has not been carried out to long-term
financial investments, the fair value of which is less than the
balance sheet value - information on the balance sheet and fair
value of individual assets or asset groups, explaining why
reduction of value is not being applied and indicating the facts,
which certify that the reduction in value is short-term and has
occurred due to transitional circumstances;
3) the total remuneration allocated to the management for
performance of their functions according to individual groups of
positions (members of the supervisory board and executive board).
The same shall apply to pensions and similar obligations to
former members of administrative institutions;
4) the average number of employees in the reporting year in
division by categories (members of the supervisory board, members
of the executive board, other employees). If the profit or loss
account is not drawn up on the basis of the scheme specified in
Annex 2 to this Law, staff expenses shall be detailed in the way
laid down in the item 6 of the abovementioned scheme;
5) balances of deferred tax assets and liabilities (if any) at
the beginning and end of the reporting year and changes to such
balances;
6) information on subsidiaries and associated undertakings of
the group of companies:
a) name, legal address and participatory share expressed as
percentage in the fixed capital of the relevant undertaking;
b) the amount of equity and of profit or loss according to the
last approved annual statement of each such undertaking.
Information on the amount of equity and profit or loss of the
associated undertaking need not to be provided, if the relevant
undertaking does not make its annual statement available to the
public and it is not a subsidiary of another undertaking;
7) the number and nominal value, if any has been determined,
of stocks or shares subscribed during the reporting year. If the
nominal value has not been determined, the accounted value of
such stocks or shares shall be indicated;
8) if fixed capital consists of several types of stocks or
shares (for a co-operative company - co-operative shares), the
number and nominal value of stocks or shares (for a co-operative
company - co-operative shares) of each type. If the nominal value
has not been determined, the accounted value of such stocks or
shares shall be indicated;
9) existence of any participatory certificate, convertible
bonds, guarantee traded on a regulated market, options or similar
financial instrument, indicating the number and rights granted
thereby;
10) for a partnership - also the name, legal address, and type
of each commercial company the participant in which is such
partnership;
11) if the undertaking is a subsidiary of other commercial
company:
a) the name and legal address of the largest commercial
company which shall prepare a consolidated annual statement as a
parent undertaking of the group of companies, including such
undertaking as its subsidiary therein;
b) the name and legal address of the smallest commercial
company which shall prepare a consolidated annual statement as a
parent undertaking of the group of companies, including such
undertaking as its subsidiary therein, and itself being included
as a subsidiary of the group of companies in the consolidated
annual statement drawn up by the largest commercial company
referred to in Sub-paragraph "a";
c) the place [the Enterprise Register of the Republic of
Latvia (hereinafter - the Enterprise Register) or a relevant
register institution of another European Union Member State, or a
relevant parent undertaking of the group of companies], where
copies of the consolidated annual statements referred to in
Sub-paragraphs "a" and "b" of this Clause may be received,
provided that such statements are available;
12) proposal for distribution of profit or covering of losses,
but in the relevant case - information regarding distribution of
profit (also for extraordinary dividends, if any have been) or
covering of losses;
13) information regarding each agreement not included in the
balance sheet, indicating the type, purpose, and financial
influence thereof, if the risks or benefits related to such
agreement are significant and if the information regarding such
risks and benefits is necessary in order to assess the financial
position of the undertaking (for example, establishment or use of
an undertaking founded for special purposes, offshore activities
in order to solve economic, legal, tax, or accounting issues,
agreement regarding risk or benefit sharing, combined repurchase
and sale transactions, debt factoring, consignment stock
agreements, attraction of contract work, outsourcing);
14) information regarding transactions of the undertaking with
related parties, if such transactions are significant and do not
conform to normal market conditions, indicating the amount of
such transactions, the type of relationship of the related
parties and other information regarding such transactions, which
is necessary in order to understand the financial status of the
undertaking. Information regarding individual transactions with
related parties may be joined in groups on the basis of the type
of such transactions, except cases where it is necessary to
provide information separately in order to assess the impact of
related party transactions on the financial status of the
undertaking;
15) information regarding balances of cash and its equivalents
(in the cash flow statement) at the beginning and end of the
reporting year;
16) changes in value of balances of equity in relation to
changes in the accounting policy or correction of a mistake made
in previous years;
17) detailed information on research and development
costs.
(2) With derogation from the requirements for provision of
information laid down in Paragraph one, Clause 14 of this
Section, medium-sized undertakings are allowed to indicate only
such information on transactions of the undertaking with related
parties which applies to transactions conducted with stockholders
or shareholders, subsidiaries and associated undertakings of the
same undertaking, as well as with the management (members of the
supervisory board and executive board) of the same
undertaking.
(3) The information laid down in Paragraph one, Clause 6 of
this Section need not be provided, if it could seriously harm the
interests of the respective undertaking by indicating in annex to
the financial statement that such information is not provided due
to the abovementioned reason.
(4) An undertaking, which is a parent undertaking of the group
of companies itself, need not to provide the information referred
to in Paragraph one, Clause 6 of this Section in annex to the
financial statement in the following two cases:
1) if the information laid down in Paragraph one, Clause 6 of
this Section on subsidiaries of the group of companies and
associated undertakings is provided in annex to the consolidated
financial statement which has been prepared by the same parent
undertaking of the group of companies or another, larger parent
undertaking of the group of companies which has included
abovementioned subsidiaries and associated undertakings of the
group of companies in its consolidated financial statement;
2) if a parent undertaking of the group of companies has
applied equity method for assessment of subsidiaries and
associated undertakings of the group of companies in its
financial statement or consolidated financial statement.
[7 December 2017; 11 November 2021 / See Paragraph 9
of Transitional Provisions]
Section 54. Additional Information
Only for Large Undertakings in Annex to the Financial
Statement
(1) Large undertakings shall also provide the following
information in annex to the financial statement in addition to
the information laid down in Sections 52 and 53 of this Law:
1) net turnover in division by types of economic activity in
conformity with statistical classification of economic activities
laid down in Regulation (EC) No 1893/2006 of the European
Parliament and of the Council establishing the statistical
classification of economic activities NACE Revision 2 and
amending Council Regulation (EEC) No 3037/90 as well as certain
EC Regulations on specific statistical domains (Text with EEA
relevance), and by geographical markets, if the types of economic
activities and geographical markets of the undertaking differ
significantly;
2) sum total of remuneration calculated for a sworn auditor of
an undertaking or for a commercial company of sworn auditors
(hereinafter - the sworn auditor) in the reporting year in
division by each of the following types of services provided by
the sworn auditor:
a) mandatory audit (review) of annual statement;
b) carrying out of other audit tasks;
c) consultation regarding tax issues;
d) carrying out of other tasks of a specialist.
(2) The information laid down in Paragraph one, Clause 1 of
this Section need not be provided if it could seriously harm the
interests of the respective undertaking, indicating in the annex
to the financial statement that such information is not provided
for the abovementioned reason.
Chapter
XI
Management Report
Section 55. Contents of a Management
Report
(1) Clear information regarding the development, financial
results of the performance, and financial status of the
undertaking, as well as information regarding substantial risks
and unclear circumstances faced by the undertaking shall be
provided in the management report. Such information shall be
justified by clear and comprehensive analysis of the development,
financial results of the performance, and financial status of the
undertaking according to the scope and complexity of operation of
the relevant undertaking.
(2) Insofar as it is necessary in order to understand the
development of the undertaking, financial results of activities,
or financial position thereof, the following shall be included in
the analysis referred to in Paragraph one of this Section:
1) the indicators of financial results;
2) insofar as it is important also the main non-financial
indicators characterising the undertaking and the relevant
sector, as well as information regarding the influence of
environmental protection requirements and information regarding
the employees or other information;
3) in the relevant case - references to the sums indicated in
the financial statement and additional explanations regarding
them.
(3) The following information must also be provided in the
management report:
1) regarding development of the undertaking;
2) measures in the field of research and development;
3) the undertaking's aggregate own stock or share, including
regarding:
a) the reason for acquiring own stock or shares in the
reporting year,
b) number of own stocks or shares repurchased or sold in the
reporting year and sum total of nominal value thereof, or, if
nominal value is not determined - sum total of accounting value
of such stocks or shares, as well as proportion expressed as
percentage in fixed capital, repurchase or sale sum total,
c) number of stocks or shares acquired and held by the
undertaking and sum total of nominal value thereof, or, if
nominal value is not determined - sum total of accounting value
of such stocks or shares, as well as proportion expressed as
percentage in fixed capital at the end of the reporting year;
4) affiliates and representations of the undertaking abroad
(number in division by countries);
5) use of financial instruments, if it is significant for the
assessment of assets, liabilities, financial position, and profit
or loss of the undertaking:
a) objectives and policy of the financial risk management,
approved risk management policy in respect to each type of
significant foreseeable future transaction to which risk
limitation accounting is applied;
b) subordination of the undertaking to market risk, credit
risk, liquidity risk, and cash flow risk.
(4) Small undertakings and medium-sized undertakings are
allowed not to submit the information referred to in Paragraph
two, Clause 2 of this Section.
Chapter
XII
Reliefs and Exemptions for Micro-entities
Section 56. Permission not to
Prepare a Management Report
A micro-entity needs not prepare a management report if it
provides the information referred to in Section 55, Paragraph
three, Clause 3 of this Law regarding aggregate of its stocks or
shares in annex to the financial statement.
Section 57. Permission to Prepare a
Shortened Annex to the Financial Statement
A micro-entity may prepare a shortened annex to the financial
statement. It is permitted not to provide the information
referred to in Section 52, Clauses 4, 7, and 8 of this Law in the
shortened annex to the financial statement.
Section 58. Exemption from Preparing
an Annex to the Financial Statement
(1) If a micro-entity does not exceed two of limit values
indicated in Paragraph two of this Section on the balance sheet
date, by derogation from the requirements laid down in Section 9,
Paragraph one of this Law, it is permitted not to draw up an
annex to the financial statement. In such case the information
referred to in Section 52, Paragraph one, Clauses 2 and 3 and
Section 55, Paragraph three, Clause 3 of this Law shall be
provided in the end of the balance sheet in the form of notes
with figures, text, or tables (hereinafter - notes to the balance
sheet), as well as information regarding the average number of
employees in the reporting year.
(2) The limit values referred to in Paragraph one of this
Section shall be as follows:
1) balance sheet total - EUR 50 000;
2) net turnover - EUR 100 000;
3) average number of employees during the reporting year -
5.
(3) A micro-entity which does not draw up an annex to the
financial statement and in the reporting year:
1) has changed the layout of the profit or loss account, in
addition shall explain the reason for such change (Section 10,
Paragraph six);
2) has combined insignificant amounts, which apply to several
balance sheet items, in one balance sheet item, in addition shall
provide details of such total amount (Section 11, Paragraph
two);
3) has detected mistakes of the previous reporting years or
changed the accounting policy and accordingly adjusted the data
of the previous reporting years, in addition shall provide an
explanation regarding each case (Section 12, Paragraph
three);
4) has included interest of received borrowings in the
production cost price of the newly established object, in
addition shall provide information regarding the amount of
interest included in the cost price (Section 28).
Section 59. Prohibition to Use
Possibility to Assess Financial Instruments in Fair Value
The possibility referred to in Chapter VI of this Law to
assess financial instruments in fair value thereof shall not
apply to such micro-entity which uses at least one of the reliefs
or exemptions referred to in Section 56, 57, or 58 of this
Law.
Section 60. Prohibition to Apply
Reliefs and Exemptions to a Certain Type of Undertakings
The reliefs and exemptions provided for in Sections 56, 57,
and 58 of this Law shall not apply to a micro-entity:
1) the only task of which is to invest its funds in different
securities, immovable property, or other assets with the only
purpose to divide investment risk and to ensure profit for its
stockholders or members from the management of their funds;
2) which is related with the micro-entity referred to in
Clause 1 of this Section by participation in capital (hereinafter
in this Clause - related micro-entity), if the only purpose of
such related micro-entity is to purchase completely paid stocks
or shares issued by the micro-entity referred to in Clause 1;
3) the only purpose of which is to acquire participation
(stocks or shares) in other undertakings, to manage such
participation and gain profit from it, without involving in the
management of the abovementioned other undertakings neither
directly nor indirectly, but also without prejudice to the rights
of stockholder or member.
Chapter
XIII
Consolidated Annual Statement and Undertakings to be Involved in
Consolidation
Section 61. Obligation to Prepare a
Consolidated Annual Statement
A commercial company and co-operative company registered in
the Republic of Latvia, a European economic interest group
registered in the Republic of Latvia, a European co-operative
society, and a European commercial company, if the abovementioned
person is a parent undertaking of the group of companies, have
the obligation to prepare a consolidated annual statement for
each reporting year within the meaning of the Accounting Law if
such parent undertaking is directly or indirectly (with
participation of one or several subsidiaries of such group of
companies) has acquired control in conformity with at least one
of the following conditions:
1) it has the majority of stockholders' or members' voting
rights (more than 50 per cent of the voting rights) based on the
participatory capital in the relevant subsidiary (regardless of
the amount of this participatory share);
2) it has the right to appoint or remove the majority of
members (more than 50 per cent of members) of the supervisory or
executive bodies of the subsidiary based on the participatory
capital in the relevant subsidiary (regardless of the amount of
this participatory share);
3) it has the right to exercise the prevailing influence in
the subsidiary of the group of companies on the basis of a
contract entered into together with other stockholders or members
of the subsidiary or according to the articles of association of
this undertaking (regardless of whether the parent undertaking
does or does not have participatory capital shares in this
undertaking);
4) majority of members of the supervisory or executive body of
the subsidiary of the group of companies who have been in the
relevant positions in the current reporting year, previous
reporting year and until preparation of the consolidated
financial statement have been appointed only as a result of use
of voting rights of the parent undertaking of the group of
companies;
5) it unilaterally controls majority voting rights of
stockholders or members in the abovementioned subsidiary of the
group of companies on the basis of the contract entered into with
other stockholders or members of this subsidiary.
[11 November 2021]
Section 62. Calculating the Number
of Voting Rights and Members of a Supervisory Body and Executive
Body
The number of voting rights referred to in Section 61 of this
Law, members of a supervisory body and executive body shall be
calculated as follows:
1) the number of voting rights and members of the supervisory
body and executive body of the parent undertaking of a group of
companies shall be added respectively to the number of voting
rights and members of the supervisory body and executive body of
other subsidiaries of the group of companies or persons who are
acting in their own name, but for the benefit of the parent
undertaking of the group of companies or subsidiaries of this
group;
2) the voting rights with regard to stock or shares shall
reduce the total number of voting rights of the stockholders or
members of the subsidiary of the group of companies:
a) held by minority stockholders and used for the benefit of
the minority stockholders themselves;
b) held by way of security for obligations, to the extent that
the voting rights are exercised for the benefit of the person for
whom the security for obligations is provided or according to the
conditions of the person granting the loan;
c) held by the relevant subsidiary itself or its subsidiary,
or by a person acting in his or her own name but for the benefit
of the relevant subsidiary or its subsidiary.
Section 63. Undertakings to be
Included in Consolidation
(1) In preparing a consolidated annual statement, the parent
undertaking of the group of companies and all of its subsidiaries
regardless of whether legal address of such subsidiaries is in
the Republic of Latvia or abroad, except for those subsidiaries
which in accordance with Section 68 of this Law are not included
in consolidation shall be included in consolidation.
(2) A subsidiary of the group of companies shall be included
in consolidation starting from the day on which the parent
undertaking of the group of companies has acquired control over
such subsidiary.
(3) A subsidiary of the group of companies shall be excluded
from consolidation starting from the day on which control of the
parent undertaking of the group of companies over such subsidiary
expires.
Section 64. Exemption from an
Obligation to Prepare a Consolidated Annual Statement for a
Parent Undertaking of Small Group of Companies
(1) A parent undertaking of the group of companies referred to
in Section 61 of this Law is exempted from the obligation to
prepare a consolidated annual statement, if it is the parent
undertaking of a small group of companies (Sections 6 and 7).
(2) The exemption provided for in Paragraph one of this
Section shall not be applied if the transferable securities of
the parent undertaking of the group of companies or of one of its
subsidiaries have been included in the regulated market.
Section 65. Exemption from the
Obligation to Prepare a Consolidated Annual Statement for a
Parent Undertaking of the Group of Companies which is a
Subsidiary of Another Group of Companies
(1) The parent undertaking of a group of companies referred to
in Section 61 of this Law which concurrently is a subsidiary of
another group of companies shall be exempted from the obligation
to prepare a consolidated annual statement if the parent
undertaking of the group of companies of such undertaking
(exempted from preparation of the consolidated annual statement)
is such undertaking registered in Latvia or in another European
Union Member State which conforms to at least one of the
following conditions:
1) it owns all (100 per cent) of the stocks or shares in the
undertaking, which in accordance with the procedures provided for
in this Section is exempted from the obligation of preparing a
consolidated annual statement. When determining participation of
capital in such undertaking, the stocks or shares which are owned
by members of the supervisory body or executive body of such
undertaking according to the obligation laid down in laws and
regulations or in documents establishing the undertaking or in
the articles of association thereof;
2) it owns at least 90 per cent of the stocks or shares in an
undertaking, which in accordance with the procedures provided for
in this Section is exempted from the obligation of preparing a
consolidated annual statement, and the remaining stockholders or
members (minority stockholders) of this undertaking have agreed
(are informed and do not oppose) to the application of the
abovementioned exemption.
(2) The exemption provided for in this Section shall be
applied in accordance with the following conditions:
1) the parent undertaking of the group of companies, exempted
from the obligation to prepare a consolidated annual statement,
and all of its subsidiaries are included in the consolidated
annual statement of such parent undertaking of the group of
companies which is the undertaking registered in Latvia or in
another European Union Member State, and such consolidated annual
statement has been prepared according the requirements of that
country in which the undertaking has been registered, or with the
international accounting standards;
2) a true copy of the consolidated annual statement referred
to in Clause 1 of this Paragraph together with a true copy of a
report by a sworn auditor or a true copy of a report of such
person who is responsible for the audit of the consolidated
annual statement in another European Union Member State, and
translation of these documents into Latvian (if documents are
submitted by an undertaking registered in another European Union
Member State and they have not been prepared in Latvian) shall be
submitted to the Enterprise Register in accordance with the
procedures laid down in Section 98, Paragraph one of this
Law;
3) a true copy of the consolidated annual statement referred
to in Clause 1 of this Paragraph together with a true copy of a
report by a sworn auditor or a true copy of a report of such
person who is responsible for the audit of the consolidated
annual statement in another European Union Member State (if the
abovementioned documents have been prepared in Latvian), or
translation of these documents into Latvian (if documents are
submitted by an undertaking registered in another European Union
Member State and they have not been not prepared in Latvian) have
been published in accordance with the procedures laid down in
Section 98, Paragraph two of this Law;
4) the annex to the financial statement of an undertaking
which is exempted from the obligation to prepare a consolidated
annual statement shall contain the identification data for the
parent undertaking of the group of companies (name, legal
address, and registration number in the Enterprise Register or in
the relevant register authority of another European Union Member
State) and information regarding the undertaking being exempted
from the obligation to prepare the consolidated annual
statement.
(3) The exemption provided for in this Section shall not be
applied if the transferable securities of the parent undertaking
of the group of companies or of one of its subsidiaries have been
included in the regulated market.
[11 November 2021]
Section 66. Exemption from the
Obligation to Prepare a Consolidated Annual Statement for a
Parent Undertaking of the Group of Companies Having Only such
Subsidiaries Information on which is not Significant
The parent undertaking of the group of companies referred to
in Section 61 of this Section is exempted from the obligation to
prepare a consolidated annual statement if it only has such
subsidiaries information on which (by assessing each subsidiary
separately and all subsidiaries as an aggregate) is not
significant.
Section 67. Exemption from an
Obligation to Prepare a Consolidated Annual Statement for a
Parent Undertaking of the Group of Companies Having Only such
Subsidiaries which are not to be Included in Consolidation
The parent undertaking of the group of companies referred to
in Section 61 of this Section is exempted from the obligation to
prepare a consolidated annual statement, if it has only such
subsidiaries which are not to be included in consolidation on the
basis of the circumstances referred to in Section 68 of this
Law.
Section 68. Non-inclusion of a
Subsidiary of the Group of Companies in Consolidation
A subsidiary of the group of companies shall not be included
in consolidation if at least one of the following circumstances
exists:
1) strict long-term restrictions substantially hinder the
ability of the parent undertaking of the group of companies to
exercise its rights over the assets and management of the
subsidiary of the group of companies;
2) the information necessary for the preparation of the
consolidated annual statements can be obtained only by being late
regarding the time periods specified in Section 97 of this Law
and with excessively large costs;
3) stocks or shares of the subsidiary of the group of
companies are held in the ownership of its parent undertaking
only for the purpose of selling them later;
4) information on the subsidiary of the group of companies is
not of significance for the implementation of the requirements of
Section 69, Paragraph three of this Law. If there are several
such subsidiaries within the same group of companies and they are
significant as a whole upon exclusion of which from consolidation
a true and fair view of the results and financial position of the
group of companies would not be provided, they may not be
excluded from consolidation.
Chapter
XIV
Conditions for Preparation of a Consolidated Annual
Statement
Section 69. Composition of a
Consolidated Annual Statement and General Provisions for
Preparation Thereof
(1) The consolidated annual statement, as a unified whole,
shall consist of a consolidated financial statement and a
consolidated management report. The consolidated financial
statement shall consist of the consolidated balance sheet,
consolidated profit or loss calculation, consolidated cash flow
statement, consolidated statement of changes in equity and annex
to the consolidated financial statement (hereinafter - components
of the consolidated financial statement).
(2) The consolidated annual statement shall be prepared
clearly and in accordance with the Accounting Law, this Law, and
other laws and regulations.
(3) The consolidated annual statement shall provide a true and
fair view of the funds (assets), liabilities, financial position,
profit or loss, and cash flow of the group of companies.
(4) If the information included in the consolidated annual
statement, which has been drawn up in accordance with this Law,
does not provide a sufficiently true and fair view of the group
of companies, additional information shall be provided in annex
to the consolidated financial statement.
(5) In exceptional cases, in order to provide a true and fair
view of the group of companies within the meaning of Paragraph
three of this Section, there may be a derogation from the
requirements of Sections 71, 72, 74, 76, 77, 78, 79, 81, 86, and
87 of this Law. Each such case of derogation shall be explained
in annex to the consolidated financial statement, indicating the
norm of this Law from the application of which the parent
undertaking of the group of companies has derogated, the reason
for such derogation and influence on the assets, liabilities,
financial position, profit or loss, or cash flow of the group of
companies.
[11 November 2021]
Section 70. Permission to Prepare a
Consolidated Annual Statement According to the International
Accounting Standards
On the basis of Article 5 of Regulation (EC) No 1606/2002 of
the European Parliament and of the Council of 19 July 2002 on the
application of international accounting standards, the parent
undertaking of a group of companies may prepare a consolidated
annual statement according to the international accounting
standards. In the case referred to in this Section the provisions
of Section 3, Paragraph five, Clauses 1, 2, and 3 of this Law
accordingly shall be applied for the assessment of the items of
the consolidated annual statement and consolidated financial
statement, component parts of the consolidated financial
statement and for the provision of explanatory information in the
consolidated financial statement by the parent undertaking of the
group of companies.
Section 71. Schemes for Component
Parts of the Consolidated Financial Statement
(1) A consolidated balance sheet shall be prepared in
accordance with the scheme indicated in Annex 1 to this Law.
(2) One of the schemes indicated in Annex 2 or 3 to this Law
may be chosen for the preparation of the consolidated profit or
loss calculation.
(3) A consolidated cash flow statement shall be prepared in
accordance with the scheme indicated in Annex 4 or 5 to this
Law.
(4) A consolidated statement of changes in equity shall be
prepared in accordance with the scheme indicated in Annex 6 to
this Law.
(5) The provisions of Sections 10, 11, 12, 14, and 15, and
also of Chapters V, VI, VII, VIII, and IX of this Law shall be
applied accordingly to the component parts of the consolidated
financial statement, taking into account significant adjustments
arising from peculiarities of the consolidated financial
statement.
Section 72. Procedures for Joining
of Amounts Indicated in Financial Statement Items of the
Undertakings Included in Consolidation
(1) A consolidated financial statement shall be prepared by
joining the amounts indicated in the relevant items of the
financial statement of a parent undertaking of the group of
companies and subsidiaries included in consolidation (hereinafter
also - the undertakings included in consolidation) in accordance
with the procedures indicated in this Section. In order to
prepare the consolidated financial statement as the financial
statement of a single undertaking, the consolidation procedures
indicated in Section 73 of this Law shall be followed.
(2) The asset and liability items of the balance sheets of the
undertakings included in consolidation shall be incorporated in
full in the consolidated balance sheet.
(3) The profit or loss account items of the undertakings
included in consolidation shall be incorporated in full in the
consolidated profit or loss account.
(4) The cash flow statement items of the undertakings included
in consolidation shall be incorporated in full in the
consolidated cash flow statement, if it is prepared by applying
the direct method. If the consolidated cash flow statement is
prepared by applying the indirect method, then the amounts to be
included in this statement shall be calculated by increasing or
reducing the amounts accordingly, which are indicated in the
consolidated profit or loss calculation items. Information
included in the consolidated balance sheet, as well as
information acquired additionally regarding cash flows of the
undertakings included in consolidation in the reporting year
shall be used for calculations (Section 46).
(5) The amounts to be included in the items of the
consolidated statement of changes in equity of the undertakings
included in consolidation shall be determined on the basis of the
amounts indicated in the consolidated balances sheet equity items
and additionally acquired information regarding changes of equity
and components thereof of the undertakings included in
consolidation in the reporting year.
Section 73. Consolidation
Procedures
(1) Consolidation procedures are as follows:
1) such financial statements of subsidiaries included in
consolidation are adjusted in which different principles for
preparation of the financial statement and assessment methods
other than those in the financial statement of the parent
undertaking (conditions of Section 74 are applied) have been
used;
2) the financial statements of subsidiaries of the group of
companies which are registered in foreign countries are
re-calculated in euros (conditions of Section 75 are
applied);
3) the balance sheet value of the investment by the parent
undertaking of the group of companies and the corresponding value
of the participatory share in the equity of the subsidiary
(consolidation of equity) is mutually excluded (conditions of
Section 76 are applied);
4) the following amounts recorded for mutual transactions of
the undertakings included in consolidation are completely
excluded:
a) amounts of balances of mutual settlement of accounts
(conditions of Section 77 are applied);
b) amounts of revenue or costs (conditions of Section 78 are
applied);
c) amounts of increase or decrease in balance sheet value of
funds (assets) (conditions of Section 79 are applied);
5) the minority member participatory share in equity and
profit or losses of reporting year of the subsidiaries involved
in consolidation are identified (conditions of Section 80 are
applied).
(2) The consolidated financial statement shall be supported by
calculations and tables in the preparation of which the
requirements laid down in the Accounting Law for source documents
and accounting registers shall be complied with. The storage
period of the abovementioned documents - calculations and tables
- shall be 10 years.
[11 November 2021]
Section 74. Adjustment of the
Financial Statement of a Subsidiary Included in Consolidation if
Different Accounting Principles and Other Assessment Methods are
Used
(1) If different principles for preparation of the financial
statement and assessment methods other than in the financial
statement of the parent undertaking are used for the financial
statement of a subsidiary of the group of companies included in
consolidation, the parent undertaking of the group of companies
shall adjust the relevant items of the financial statement when
preparing a consolidated annual statement. The values of the
relevant balance sheet items of a subsidiary of a group of
companies shall be increased or reduced and the relevant profit
or loss account items shall be calculated accordingly in the
amount of the calculated adjustments.
(2) In exceptional cases, when it is actually impossible to
calculate the amount of adjustments, it is allowed to derogate
from the requirements of Paragraph one of this Section.
Information shall be provided regarding each case of derogation,
explaining the reason.
Section 75. Conversion into Euros of
the Financial Statement of a Subsidiary of the Group of Companies
Registered in a Foreign Country
(1) In order for a subsidiary of a group of companies
registered abroad to be included in the consolidated financial
statement, the annual statement of the subsidiary which has been
prepared in a foreign currency shall be recalculated into euros.
In effecting the recalculation the following conditions shall be
observed:
1) the assets and liabilities (funds, liabilities, and equity)
shall be recalculated in euros according to the foreign currency
exchange rate used in accounting, which is in effect on the
balance sheet date (at the end of the day);
2) the revenue and expenses (costs) shall be recalculated in
euros according to the foreign currency exchange rate used in
accounting, which is in effect at the beginning of the economic
transaction day.
(2) For the purpose of recalculation in euros of the revenue
and expenses (costs) referred to in Paragraph one, Clause 2 of
this Section, it is permitted to use the average exchange rate of
the week, month, or financial year of the particular foreign
country, which has been calculated by adding up the relevant
foreign currency exchange rates in effect at the beginning of all
the calendar days in the relevant time period, used in the
accounting, and dividing the sum total obtained by the number of
calendar days in the relevant time period.
(3) If the recalculation laid down in this Section results in
differences in the value of balance sheet or profit or loss
account items, these differences shall be directly indicated in
the consolidated reserves. The positive or negative differences
included in the abovementioned reserves in the consolidated
balance sheet shall be indicated in a separate item "Foreign
exchange conversion reserve" or as part of the aggregate amount
of consolidated reserves, including the division of these
reserves in annex to the consolidated financial statement.
Section 76. Consolidation of
Equity
(1) The equity referred to in Section 73, Paragraph one,
Clause 3 of this Law shall be consolidated on the basis of the
balance value of the stocks and shares of the subsidiaries
involved in consolidation on the date which conforms to one of
the following conditions:
1) it is the date on which the subsidiary was included in
consolidation for the first time;
2) it is the date of acquisition (purchase) of the stock or
shares of the subsidiary;
3) it is the date as of which the undertaking has become a
subsidiary of the group of companies if the stock or shares of
this undertaking have been acquired (purchased) on different
dates. The assessment date shall be indicated in annex to the
consolidated financial statement.
(2) The difference arising as a result of consolidation of
equity shall be attributed to the value of the consolidated
balance sheet item, increasing or reducing it accordingly if the
value of these items is greater or less than the accounting value
initially indicated in the balance sheet of the subsidiary
included in consolidation. If the abovementioned difference
cannot be attributed fully to the items of the consolidated
balance sheet, any remaining positive amount shall be indicated
in the item "Intangible value" on the asset side of the balance
sheet. The remaining negative difference shall be immediately
included in the consolidated profit or loss account.
(3) Information shall be provided in annex to the consolidated
financial statement on the methods used, the amounts included in
the item "Intangible value", and the changes in these amounts as
compared to the previous reporting year.
(4) The procedures laid down in this Section are not
applicable to stock or shares of the parent undertaking of a
group of companies owned either by the parent undertaking itself
or by a subsidiary included in consolidation. In the consolidated
balance sheet such stock and shares shall be indicated under the
item "Own stock and shares".
Section 77. Exclusion of Amounts of
Balances of the Mutual Settlement of Accounts
The amounts of balances of the mutual settlement of accounts
(also regarding dividends), which are included in the items of
debts of debtors and creditors and in the reserve items, recorded
as a result of mutual transactions of the undertakings included
in consolidation shall be excluded from the consolidated balance
sheet items.
Section 78. Exclusion of Revenue and
Expenses
The revenue resulting from mutual transactions between the
undertakings included in consolidation and costs related to this
revenue, the dividends calculated in these undertakings and
attributable to the undertakings included in consolidation,
interest revenue and payments, as well as similar expenses shall
be excluded from the items of the consolidated profit or loss
account.
Section 79. Exclusion of the Amounts
of Increase or Decrease in Value of Funds (Assets)
The following amounts, which have been recorded regarding
mutual transactions between undertakings included in
consolidation, shall be excluded from the consolidated balance
sheet items:
1) the amounts of revenue and expenses attributable to other
reporting years, which are included under the items of the next
period revenue or next period costs;
2) the amounts of increase or reduction in the value of fixed
assets, inventories and other assets, which are included under
the respective balance sheet asset items and profit or loss
account items, unless such amounts of reduction are
irrecoverable.
Section 80. Participatory Share of
Minority Stockholders
(1) The relevant share of equity of subsidiaries involved in
consolidation in the amount corresponding to the stock and shares
held by minority stockholders shall be indicated under the
consolidated balance sheet item "Participatory share of minority
stockholders".
(2) The profit or loss for the reporting year of subsidiaries
included in consolidation which are related to the stock and
shares held by minority stockholders shall be indicated in the
consolidated profit or loss account under the item "Share of
profit or loss of minority stockholders".
Section 81. Amounts of Deferred Tax
Liabilities and Deferred Tax Assets
Amounts of deferred tax liabilities or deferred tax assets
shall be included in the consolidated balance sheet, if it is
expected that an undertaking included in consolidation will cover
or recover them accordingly in the next reporting years.
Section 82. Balance Sheet Date of
the Consolidated Annual Statement
(1) The date of the consolidated annual statement, the annual
statement of the parent undertaking of a group of companies and
the balance sheets of the annual statements of the subsidiaries
included in consolidation shall be the same, and it is the day on
which the annual statement of the parent undertaking was
prepared.
(2) If the date of the balance sheet of the annual statement
of a subsidiary of a group of companies included in consolidation
differs from the date of the balance sheet of the annual
statement of the parent undertaking by three months or more, such
subsidiary shall be included in consolidation on the basis of
financial statements prepared (non-audited) for consolidation
purposes, the date of the balance sheet of which conforms to the
balance sheet date of the consolidated annual statement.
Section 83. Inclusion of Revenues
and Costs of a Subsidiary of the Group of Companies in the
Consolidated Profit or Loss Account
Revenues and costs of a subsidiary of the group of companies
shall be included in the consolidated profit or loss account
starting from the date on which such undertaking has become a
subsidiary of the group of companies and until the date on which
the control of the parent undertaking of the group of companies
over such subsidiary ends.
Section 84. Exclusion of Balance
Sheet Items of a Subsidiary of the Group of Companies and
Participatory Share of Minority Stockholders from the
Consolidated Balance Sheet
(1) If a parent undertaking of the group of companies loses
control over a subsidiary of the group of companies included in
consolidation, the following shall be excluded from the
consolidated balance sheet:
1) asset and liability items of such subsidiary;
2) participatory share of the relevant minority
stockholders.
(2) The items referred to in Paragraph one of this Section
shall be assessed in conformity with the value of these items on
the date on which the control of the parent undertaking of the
group of companies over the subsidiary included in consolidation
ends.
Section 85. Changes in the
Composition of the Undertakings Involved in Consolidation
(1) If significant changes have taken place in the composition
of the undertakings involved in consolidation over the course of
the reporting year, information, which allows to compare these
accounts with the consolidated financial accounts of the previous
years, shall be included in the consolidated financial
accounts.
(2) In order to meet the requirements referred to in Paragraph
one of this Section, the relevant balances of items indicated in
the consolidated balance sheet may be adjusted accordingly at the
beginning of the reporting year (relevant figures of the previous
reporting year) and prepare an adjusted consolidated profit or
loss account.
Section 86. Inclusion of a Jointly
Controlled Undertaking in the Consolidated Financial Account
(1) If an undertaking included in consolidation and one or
several undertakings not included in such consolidation manage
jointly another undertaking, such jointly controlled undertaking
shall be included in consolidation, applying the same capital
method. Equity method is an accounting method using which
participation in the fixed capital of another undertaking
initially - on the day of acquisition (purchase) - is assessed
and recorded according to the costs of acquisition, but the value
of the abovementioned participation is adjusted after this date
at the end of each reporting year increasing or decreasing it
depending on the increase or decrease of the total amount of
equity of another undertaking during the relevant period of
time.
(2) Participation evaluated on the basis of the equity method
in a jointly controlled undertaking, if influence on such
undertaking is significant which is ensured with not less than 20
and not more than 50 per cent of the voting rights in such
undertaking, shall be indicated in the consolidated balance sheet
item "Participation in the capital of associated undertakings",
and the requirements of Section 87 of this Law shall be applied.
If influence on the jointly controlled undertaking is not
significant, the participation in the jointly controlled
undertaking shall be indicated in the consolidated balance sheet
item "Other securities and investments".
(3) By derogation from that referred to in Paragraphs one and
two of this Section, assets, liabilities, equity, revenue, and
expenses (costs) of a jointly controlled undertaking may be
included in the consolidated financial statement in proportion to
the participatory share of the capital of undertakings included
in consolidation in such undertaking.
(4) A jointly controlled undertaking may be included in
consolidation, using the method indicated in Paragraph one, two,
or three of this Section only if the requirements of Section 71,
Paragraph five, Sections 72, 73, 74, 75, 76, 77, 78, 79, 80, 81,
82, 83, 84, and 85 of this Law are observed accordingly.
Section 87. Inclusion of Associated
Undertaking in the Consolidated Financial Account
(1) If an undertaking included in consolidation has an
associated undertaking, it shall be indicated in the consolidated
balance sheet item "Participation in the capital of associated
undertakings".
(2) Initially, upon including participation in the capital of
an associated undertaking in the consolidated balance sheet, it
shall be assessed as the amount consisting of the acquisition
value of the stock or shares of the associated undertaking and
the increase or decrease in the value of the participatory share
during the period of time from the day of acquisition or from the
day on which this undertaking has become an associated
undertaking, if stock or participatory shares have been acquired
(purchased) on different dates, up to the date of the
consolidated annual statements. The abovementioned increase or
decrease in value shall be calculated according to the annual
statement data of the associated undertaking, on the basis of the
proportion (in percentage) of the capital invested in the equity
of the associated undertaking (equity method).
(3) The difference between the acquisition value of the stock
or shares of the associated undertaking, calculated in accordance
with the assessment provisions provided for in the Section 14,
Paragraph one, Clause 10 of this Law, and the amount which
corresponds to the proportion (in percentage terms) of the
capital invested in the equity of the associated undertaking on
the day of acquisition, shall be indicated in annex to the
consolidated financial statement. The abovementioned difference
shall be calculated according to the situation as on the date on
which the equity method is applied for the first time. It shall
also be indicated in annex to the consolidated financial
statement whether, by initially including participation in the
capital of an associated undertaking in the consolidated balance
sheet, it is indicated in the acquisition value or in the amount
which conforms to the proportion thereof in the equity of the
associated undertaking.
(4) The annual statement of the associated undertaking, where
possible, shall be prepared in conformity with the accounting
methods used in the consolidated financial statement. If the
associated undertaking is registered in a foreign country, its
annual statement prepared in a foreign currency shall be
recalculated in euros, applying the provisions of Section 75 of
this Law accordingly. If different principles and other
assessment methods than in the consolidated financial statement
are used in the financial statement of the associated undertaking
for preparation of the financial statement, the parent
undertaking of the group of companies may adjust the
corresponding financial statement items of the associated
undertaking accordingly in order to calculate the difference
referred to in Paragraph three of this Section. If such
adjustment is not performed, information regarding such fact
shall be provided in annex to the consolidated financial
statement.
(5) In the reporting years following the initial inclusion of
the participatory capital in the associated undertaking in the
consolidated balance sheet, the amount indicated under the item
"Participation in the capital of associated undertakings" shall
be adjusted by increasing or reducing it according to the
increase or reduction in the equity of the associated undertaking
during the relevant period of time.
(6) At the end of each reporting year the amount indicated
under the item "Participation in the capital of associated
undertakings" shall also be reduced by the amount of the
dividends calculated for the associated undertaking, which is
related to such participation.
(7) If the difference referred to in Paragraph five of this
Section is positive, it shall be included in the amount indicated
under the item "Participation in the capital of associated
undertakings" of the consolidated balance sheet. If such
difference cannot be attributed fully to the abovementioned
balance sheet item, any remaining positive amount shall be
indicated in the item "Intangible value". The negative difference
formed shall be immediately included in the consolidated profit
or loss account.
(8) The amount of the profit or loss of the associated
undertaking during the reporting year, which is related to stock
or shares held by the undertakings included in the consolidation,
shall be indicated in a separate consolidated profit or loss
account item, conforming to one of the following conditions:
1) under the item "Revenue from participation in the capital
of associated undertakings" - if it is part of the profit of the
associated undertaking;
2) under the item "Reduction in the value of participation in
associated undertakings" - if it is part of the loss of the
associated undertaking.
(9) The participatory capital in the assessment reserve and
other reserves of long-term investments of the associated
undertaking, which have been created in relation to changes in
the assets value, shall be indicated in the consolidated balance
sheet, including directly into equity.
(10) The exclusion provided for in Section 73, Paragraph one,
Clause 4 of this Law shall be effected only to the extent as
justified by source documents or facts concerning which it is
possible to obtain source documents.
(11) If the associated undertaking prepares a consolidated
financial statement, the procedures laid down in this Section
shall be applied to equity items indicated in such consolidated
financial statement.
(12) The associated undertaking has a duty to provide those
undertakings, which exercise significant influence over it, with
a true copy of the annual statement approved at the general
meeting of stockholders or members of the associated undertaking.
If the associated undertaking prepares the consolidated annual
statement, the provision referred to in this Paragraph of Section
shall also apply to the consolidated annual statement.
(13) The procedures laid down in this Section shall not be
applied, if information on participation in the capital and
profit or loss of the associated undertaking is immaterial in
order to meet the requirements laid down in Section 69, Paragraph
three of this Law.
Section 88. Content of Annex to the
Consolidated Financial Statement and Procedures for Preparation
Thereof
(1) The information laid down in Chapter X of this Law and in
this Chapter shall be provided in annex to the consolidated
financial statement. The abovementioned information shall be
provided in a way to facilitate for users of the consolidated
annual statement the assessment of the financial position of the
undertakings included in the consolidation as a whole. In
preparing such information, significant adjustments arising from
peculiarities of the consolidated annual statement in comparison
to financial statements of the undertakings included in
consolidation shall be taken into account, including:
1) in providing information regarding transactions of the
parent undertaking of the group of companies or other
undertakings included in consolidation with related parties
(Section 53, Paragraph one, Clause 14), mutual transactions of
the undertakings included in consolidation, which are excluded as
a result of consolidation procedures, shall not be included
therein;
2) in providing information regarding the average number of
employees of the undertakings included in consolidation in the
reporting year (Section 52, Paragraph one, Clause 6), the average
number of employees in jointly controlled undertakings shall be
indicated separately;
3) in providing information on the amounts of the advance
payments, loans, or guarantee liabilities issued to the
management (Section 52, Paragraph one, Clause 3) and the sum
total of remuneration granted to the management for the
performance of functions (Section 53, Paragraph one, Clause 3),
only the total amount of remuneration granted and amount of
advance payments, loans, or guarantee liabilities issued to
members of the supervisory body and executive body of the parent
undertaking of the group of companies for the performance of
their functions in the parent undertaking and its subsidiaries
shall be disclosed in division by separate position groups
(members of the supervisory board and executive board). The same
applies to pensions and similar liabilities with respect to the
former members of the supervisory body and executive body of the
parent undertaking of the group of companies.
(2) In addition to the information referred to in Paragraph
one of this Section the following information shall be provided
in annex to the consolidated financial statement:
1) the name and legal address of the undertakings involved in
consolidation, as well as the capital shares (in percentage) in
such undertakings (except the parent undertaking of the group of
companies), held by undertakings or persons involved in
consolidation, which are acting in their own name but for the
benefit of the undertakings involved in consolidation, moreover,
it shall also be indicated which of the conditions of Section 61
of this Law justifies the inclusion of the undertaking in
consolidation. The information referred to in this Clause shall
also be provided for those subsidiaries of the group of companies
which have not been included in consolidation in accordance with
Section 66 or 68 of this Law, together with the basis for
non-inclusion;
2) the name and legal address of associated undertakings, as
well as the proportion of their capital (in percentage), held by
the undertakings involved in consolidation or by persons acting
in their own name but for the benefit of undertakings involved in
consolidation;
3) the name and legal address of jointly controlled
undertakings together with the justification for the joint
control of such undertakings, as well as capital shares of such
undertakings (in percentage), held by the undertakings involved
in consolidation or by persons acting in their own name but for
the benefit of undertakings involved in consolidation;
4) the name and legal address of the remaining undertakings,
which are not referred to in Paragraph two, Clauses 1, 2, and 3
of this Section, and in which the undertakings involved in
consolidation, either themselves or through persons acting in
their own name but for the benefit of those undertakings, hold
capital shares, and the amount of participatory capital share,
the amount of equity, and the profit or loss of the relevant
undertaking for the last reporting year for which the annual
statements of the undertaking have been approved. Information
which refers to the equity and profit or loss need not to be
submitted if the relevant undertaking does not publish its annual
statement.
(3) The information laid down in Paragraph two, Clause 1 of
this Section on which of the provisions of Section 61 of this Law
justifies involvement of the undertaking in consolidation need
not to be provided if consolidation is implemented on the basis
of Section 61, Clause 1 of this Law and if a participatory
capital share and voting right share of the stockholders or
members are equal (the procedures for calculating voting rights
laid down in Section 62 of this Law shall be applied).
Section 89. Consolidated Management
Report
(1) At least the information laid down in Chapter XI of this
Law shall be provided in the consolidated management report on
undertakings included in consolidation as a whole.
(2) In the consolidated management report the information
shall be provided in a way to facilitate for users of the
consolidated annual statement the assessment of the undertakings
included in consolidation as a whole. In preparing such
information, significant adjustments arising from peculiarities
of the consolidated management report in comparison to management
reports of the undertakings included in consolidation shall be
taken into account. Also, in disclosing the information on the
undertaking's own stock or shares as a whole (Section 55,
Paragraph three, Clause 3), the stock or shares of the parent
undertaking of a group of companies held by this parent
undertaking itself or by its subsidiaries, or by persons acting
in their own names but for the benefit of the undertakings of the
group of companies (the number of stock or shares and their
nominal value shall be indicated as well) shall be indicated.
Section 90. Joining of a
Consolidated Management Report with a Management Report
A parent undertaking of the group of companies may prepare a
management report and a consolidated management report as one
document providing both, the information laid down in Section 55
of this Law regarding the parent undertaking of the group of
companies and the information laid down in Section 89 of this Law
regarding undertakings included in consolidation as a whole.
Chapter
XV
Audit (Review) or Limited Review of the Annual Statement and
Consolidated Annual Statement
Section 91. Audit (Review) of the
Annual Statement and Consolidated Annual Statement
(1) The annual statement prepared by the undertaking referred
to in Section 3, Paragraph one, Clause 1 of this Law, if it is a
medium-sized undertaking or large undertaking or if its
transferable securities are included in the regulated market, as
well as the consolidated annual statement prepared by the parent
undertaking of the group of companies shall be audited (reviewed)
and a report on the results of the audit (review) carried out
shall be provided by a sworn auditor (several sworn auditors) or
a commercial company of sworn auditors (hereinafter - the sworn
auditor) in accordance with the law On Sworn Auditors.
(2) The annual statement prepared by a small undertaking
referred to in Section 3, Paragraph one, Clause 1 of this Law
shall be audited (reviewed) and an auditor's report shall be
provided by a sworn auditor regarding the results of the audit
(review) carried out only in the following cases:
1) if the indicators of such undertaking for two years in
succession (in the current and previous reporting year), but for
a newly established undertaking - on the balance sheet date of
the first reporting year, exceed two of three limit values of the
criteria referred to in this Clause:
a) the balance sheet total - EUR 800 000,
b) the net turnover - EUR 1 600 000,
c) the average number of employees in the reporting year -
50;
2) if such undertaking is a parent undertaking of the group of
companies - regardless of whether the exemption from the
obligation to prepare the consolidated annual statement referred
to in Section 64, 65, 66, or 67 of this Law applies or does not
apply thereto;
3) if such undertaking is a capital company of a public
entity, subsidiary thereof or a public-private capital company
within the meaning of the Law on Governance of Capital Shares of
Public Entity and Capital Companies;
4) if such undertaking, in applying Section 13, Paragraph
five, Clause 2 of this Law, has recognised the relevant items of
the financial statement, assessed and indicated in the financial
statement according to the international accounting
standards.
(3) Audit (review) of the annual statement or consolidated
annual statement shall also include accounting revision in order
to ascertain whether it conforms to the requirements of the laws
and regulations governing accounting. It shall also be
ascertained in audit (review) of the annual statement or
consolidated annual statement whether the requirements of the
laws and regulations governing the preparation of the annual
statement and consolidated annual statement have been conformed
to.
Section 92. Limited Review of the
Annual Statement
(1) Limited review of the annual statement is a review task to
be carried out in accordance with the law On Sworn Auditors in
respect of the data indicated in the financial statement and
information included, including the conformity of the enterprise
income tax amounts.
(2) Limited review of the annual statement of a small
undertaking referred to in Section 3, Paragraph one, Clause 1 of
this Law shall be carried out and a review report of an auditor
shall be provided by a sworn auditor in accordance with the law
On Sworn Auditors, if such small undertaking conforms to the
following conditions:
1) the conditions of Section 91, Paragraph two of this Law do
not apply to such small undertaking, in accordance with which the
annual statement is subject to an audit (review) of a sworn
auditor;
2) the indicators of such small undertaking on the balance
sheet date for two years in succession exceed two of the
following limit values:
a) the balance sheet total - EUR 400 000,
b) the net turnover - EUR 800 000,
c) the average number of employees in the reporting year -
25.
(3) The small undertaking referred to in Paragraph two of this
Section is entitled to select for the review of its annual
statement either limited review or audit (review) by a sworn
auditor laid down in Section 91 of this Law, in order to obtain a
report of the sworn auditor on results of the audit (review)
carried out.
Section 93. Provision of Information
to a Sworn Auditor
(1) The management of the undertaking referred to in Sections
91 and 92 of this Law shall submit an annual statement and
consolidated annual statement (if any should be prepared) signed
in accordance with the requirements of Section 95 of this Law to
the sworn auditor.
(2) If the undertaking referred to in Sections 91 and 92 of
this Law makes a correction in the annual statement or
consolidated annual statement after submission thereof to the
sworn auditor, however, before the date when the sworn auditor
signs the auditor's report or auditor's review report, the
management of such undertaking shall immediately notify the sworn
auditor of such fact and submit an adjusted and correspondingly
signed annual statement or consolidated account to him or
her.
Chapter
XVI
Preparation, Signing, Approval, Submission, and Publishing of the
Annual Statement and Consolidated Annual Statement
Section 94. Preparation of the
Annual Statement and Consolidated Annual Statement
(1) The annual statement (financial statement and management
report) may be prepared as one document, as an aggregate of two
documents consisting of a financial statement and management
report, or as an aggregate of several documents consisting of
separate component parts of the financial statement and
management report. General information regarding the undertaking
as the author of the document shall be indicated at the beginning
of each document, data and signature - at the end of the document
for the annual statement to have legal force. The procedures laid
down in the Law on Legal Force of Documents shall be applied to
the annual statement, but, in case the annual statement is
prepared as an electronic document, the Electronic Documents Law
shall also be applied thereto.
(2) General information regarding an undertaking is as
follows:
1) the name (firm name) of the undertaking, type and legal
address thereof, as well as registration number in the journal of
the Enterprise Register or other registers conducted by the
Enterprise Register;
2) for an individual undertaking, farming and fishing
enterprise - also the given name, surname, personal identity
number of the owner and the address indicated by the person or,
if address has not been indicated, the address of the declared
place of residence;
3) for a general partnership and limited partnership
(hereinafter - the partnership) - also the given name, surname,
personal identity number of members with personal liability and
limited partners and address indicated by the person, or, if
address has not been indicated, the address of the declared place
of residence, but for a legal person - the name, registration
number, and legal address;
4) for a joint stock company and limited liability company
(hereinafter - the capital company), as well as cooperative
company - also the given name, surname and position of members of
the executive board and supervisory board (if the supervisory
board has been established). This information shall also be
provided regarding those persons who have been removed from such
positions during the reporting year and up to the date of
approval of the annual statement.
(3) The provisions of Paragraph one of this Section shall be
applied to the consolidated annual statement accordingly. The
following shall be indicated in general information regarding the
parent undertaking of the group of companies:
1) the name (firm name), type, and legal address, as well as
registration number in the Commercial Register or Enterprise
Register;
2) the information specified in Paragraph two, Clause 3 or 4
of this Section accordingly.
Section 95. Signing of the Annual
Statement and Consolidated Annual Statement
(1) The annual statement shall be signed:
1) the annual statement of an individual undertaking, farming
or fishing enterprise - by the owner or other official who has
the right registered with the Enterprise Register to represent
the relevant individual undertaking, farming or fishing
enterprise;
2) the annual statement of the partnership - by all members of
such partnership or such members of the partnership who are
specially authorised to represent the partnership;
3) the annual statement of the capital company, as well as
co-operative company - by the executive board or authorised
member of the executive board.
(2) If a member of the partnership, member of the executive
board of the capital company or co-operative company, considers
that the annual statement cannot be approved, or also has some
objections, such person shall indicate his or her different point
of view in a special note.
(3) The consolidated annual statement shall be signed by the
management of the parent undertaking of the group of
companies:
1) in the capital company, as well as in a co-operative
company - by the executive board or authorised member of the
executive board;
2) in the partnership - by all members of such partnership or
such members of the partnership who are specially authorised to
represent the partnership.
(4) If a member of the executive board of the capital company
or co-operative society or a member of the partnership considers
that the consolidated annual statements cannot be approved, or
also has some objections, such person shall indicate his or her
different point of view in a special note.
(5) The financial statement and consolidated financial
statement shall also be signed by the person (accountant or
outsourced accountant) who has entered into a written agreement
with the undertaking, in which the obligations, rights, and
responsibility of such person in issues related to conducting of
accounting have been laid down, and he or she has prepared the
abovementioned statement, indicating his or her given name,
surname, and name of full position or name of the undertaking, or
firm name, and name of the position. An undertaking having an
accounting unit and accounting employees may appoint a person
responsible for conducting accounting and preparation of an
annual statement (for example, chief accountant), who signs the
financial statement and consolidated financial statement. In such
case the given name, surname, and name of full position shall be
indicated in the financial statement and consolidated financial
statement.
Section 96. Approval of the Annual
Statement and Consolidated Annual Statement
(1) The annual statement shall be approved in accordance with
the requirements of the laws and regulations governing the
relevant legal person.
(2) The consolidated annual statement shall be approved by the
annual meeting of stockholders or members of a parent undertaking
of the group of companies together with the annual statement of
the relevant parent undertaking of the group of companies within
seven months after the end of the reporting year.
Section 97. Submission of the Annual
Statement and Consolidated Annual Statement
(1) An undertaking shall, not later than one month after
approval of the annual statement and consolidated annual
statement (if any), submit it to the State Revenue Service in a
printed form or a derivative of the annual statement (financial
statement and management report) and consolidated annual
statement (if any) prepared electronically in an electronic form,
i.e. electronic true copy or electronic copy (if it is stipulated
in the laws and regulations regarding the electronic true copy
form of financial statements or consolidated financial statements
prepared by undertakings for inclusion in the Electronic
Declaration System of the State Revenue Service), in the
Electronic Declaration System together with an explanation (in
electronic form) as to when the annual statement and consolidated
annual statement (if any) have been approved, in compliance with
the following terms:
1) a micro-entity - not later than five months after the end
of the reporting year;
2) a small undertaking - not later than five months after the
end of the reporting year;
3) a medium-sized undertaking, a large undertaking, and a
parent undertaking of the group of companies which prepare a
consolidated annual statement - not later than seven months after
the end of the reporting year.
(2) The undertaking referred to in Section 3, Paragraph one,
Clause 1 of this Law, the annual statement or consolidated annual
statement (if any) of which is audited (revised) by a sworn
auditor, shall submit an electronic copy of the auditor's report
or auditor's revision report prepared in printed form to the
State Revenue Service in the Electronic Declaration System. The
sworn auditor shall examine and confirm in the Electronic
Declaration System that the derivative of the annual statement or
consolidated annual statement (if any) in electronic form
according to the content of the information provided conforms to
the annual statement or consolidated annual statement (if any),
regarding which the sworn auditor has provided auditor's report
or auditor's revision report.
(3) A derivative of the financial statement or consolidated
financial statement (if any) in electronic form - electronic true
copy - for submission to the Electronic Declaration System shall
be prepared according to the form approved by the Cabinet.
(31) If the management report or the consolidated
management report has been prepared in paper form, it shall be
included in the Electronic Declaration System of the State
Revenue Service as an electronic copy of the referred to
report.
(4) The commercial company, which in accordance with the
Financial Instrument Market Law prepares an annual statement and
consolidated annual statement according to the international
accounting standards, shall additionally submit an electronic
copy of the annual statement and consolidated annual statement
(if any) prepared in printed form to the State Revenue Service in
the Electronic Declaration System.
[7 December 2017; 8 March 2023 / See Paragraph 11 of
Transitional Provisions]
Section 98. Making the Annual
Statement and Consolidated Annual Statement Available to the
Public
(1) The State Revenue Service shall, not later than within
five working days, electronically transfer the documents of the
capital company, partnership and cooperative company referred to
in Section 97, Paragraphs one, two, and four of this Law to the
Enterprise Register. The Enterprise Register shall ensure public
access to the received documents. The documents shall be
transferred to the Enterprise Register, using online data
transmission mode.
(2) After receipt of the documents referred to in Section 97,
Paragraphs one, two and four of this Law, the Enterprise Register
shall publish them on its website.
[11 November 2021]
Section 99. Exemption for a
Micro-entity from Submission of the Management Report
The requirement of Section 97 of this Law regarding submission
of the component part - the management report - of the annual
statement shall not apply to a micro-entity, which has used the
permit referred to in Section 56 of this Law and has not prepared
a management report.
Section 100. Person Responsible for
Preparation, Audit (Review), and Submission of the Annual
Statement and Consolidated Annual Statement
(1) The management of the undertaking shall be responsible for
preparation of the annual statement and in respective case - the
consolidated annual statement and conformity thereof with the
provisions of this Law, or in the cases laid down in this Law -
conformity with the international accounting standards, subject
to audit (review) or limited revision, as well as submission
thereof in accordance with the procedures laid down in Section 97
of this Law.
(2) If the management of the undertaking has not submitted
documents in accordance with the requirements of Section 97 of
this Law, an official of the State Revenue Service shall apply
administrative penalty punishment for failing to comply with the
provisions for submitting annual statements or consolidated
annual statements.
Transitional
Provisions
1. With the coming into force of this Law, the Annual Accounts
Law (Latvijas Republikas Saeimas un Ministru Kabineta
Ziņotājs, 1992, No. 44/45; Latvijas Republikas Saeimas un
Ministru Kabineta Ziņotājs, 1995, No. 8; 1996, No. 24; 1998,
No. 6, 21; 2000, No. 2; 2001, 9; 2004, No. 2; 2005, No. 13, 2006,
No. 24; 2008, No. 13; 2009, No. 9; Latvijas Vēstnesis
2009, No. 199; 2010, No. 40, 102, 166; 2012, No. 101, 199; 2013,
No. 142, 194; 2014, No. 105) and the Law On Consolidated Annual
Accounts (Latvijas Republikas Saeimas un Ministru Kabineta
Ziņotājs, 2006, No. 24; 2008, 13; Latvijas Vēstnesis,
2010, 166; 2013, No. 142, 194), are repealed.
2. The provisions of this Law shall be applied to annual
statements and consolidated annual statements starting from 2016
(from the reporting year which starts on 1 January 2016 or during
the calendar year 2016).
3. The norms of the Annual Accounts Law and the Law on
Consolidated Annual Accounts and Cabinet regulations issued on
the basis of these laws shall be applied to annual statements and
consolidated annual statements accordingly, which are prepared
for the reporting year 2015:
1) Cabinet Regulation No. 488 of 21 June 2011, Regulations for
Application of the Annual Accounts Law;
2) Cabinet Regulation No. 481 of 21 June 2011, Regulations
Regarding Content of the Cash Flow Statement and Statement of
Changes in Equity and Procedures for Preparation Thereof;
3) Cabinet Regulation No. 537 of 15 June 2004, Procedures for
Presenting Financial Support (Financial Aid), Donations and Gifts
in Cash or in Kind of the State, Local Governments, Foreign
States, the European Community, Other International Organisations
and Institutions in Financial Reports.
4. The undertakings, which in relation to termination of
operation prepare an annual statement in 2016 regarding a time
period which is less than 12 months, until 31 December 2016 are
allowed to apply the norms of the Annual Accounts Law.
5. The Cabinet shall issue the regulations referred to in
Section 15, Paragraphs one and two of this Law not later than by
1 January 2016.
6. The Cabinet shall issue the regulations, which are
necessary to approve the form in accordance with Section 97,
Paragraph three of this Law, by which an undertaking shall
prepare an electronic true copy of the financial statement or
consolidated financial statement for submission to the State
Revenue Service in the Electronic Declaration System, not later
than by 1 July 2016.
7. The amendment to Section 3, Paragraph seven of this Law in
respect of the replacement of words "State capital company" with
the words "capital company" shall be applicable to annual
statements from the reporting year of 2018.
[7 December 2017]
8. Section 11, Paragraph three of this Law shall be applicable
to annual statements and consolidated annual statements from the
reporting year of 2018.
[7 December 2017]
9. Section 53, Paragraph one, Clause 17 of this Law shall be
applicable to annual statements and consolidated annual
statements from the reporting year of 2021.
[11 November 2021]
10. The Enterprise Register shall publish a notification in
the official gazette Latvijas Vēstnesis on the documents
referred to in Section 97, Paragraphs one, two and four of this
Law which have been received until 31 December 2021 that the
relevant annual statements or consolidated annual statement and
copies of the documents appended thereto are available in
electronic form in the Enterprise Register.
[11 November 2021]
11. Amendments to Section 97, Paragraph one of this Law in
respect of the terms for the submission of annual statements of
micro-entities and small undertakings shall be applicable to
annual statements from the reporting year of 2022.
[8 March 2023]
Informative
Reference to Directive of the European Union
The Law contains legal norms arising from Directive 2013/34/EU
of the European Parliament and of the Council of 26 June 2013 on
the annual financial statements, consolidated financial
statements and related reports of certain types of undertakings,
amending Directive 2006/43/EC of the European Parliament and of
the Council and repealing Council Directives 78/660/EEC and
83/349/EEC (Text with EEA relevance).
This Law shall come into force on 1 January 2016.
This Law has been adopted by the Saeima on 22 October
2015.
President R. Vējonis
Riga, 12 November 2015
Law on Annual Statements and
Consolidated Annual Statements
Annex 1
[7 December 2017]
Layout of the
Balance Sheet
Assets
Long-term investments
I. Intangible investments:
1. Development costs.
2. Concessions, patents, licences, trademarks and similar
rights.
3. Other intangible investments.
4. Intangible value.
5. Advance payments for intangible investments.
II. Fixed assets, investment properties, and biological
assets:
1. Immovable properties:
a) land parcels, buildings and engineering structures;
b) investment properties.
2. Fauna and flora:
a) draft animals or productive animals and perennial
plantings;
b) biological assets.
3. Long-term investments in rented fixed assets.
4. Long-term investments in fixed assets of a public
partner.
5. Technological equipment and devices.
6. Other fixed assets and inventory.
7. Costs of the establishment of fixed assets and unfinished
building objects.
8. Advance payments for fixed assets.
III. Long-term financial investments:
1. Participation in the capital of related undertakings.
2. Loans to related undertakings.
3. Participation in the capital of associated
undertakings.
4. Loans to associated undertakings.
5. Other securities and investments.
6. Other loans and other long-term debtors.
7. Own stocks and shares.
8. Loans to stockholders or members, and management.
9. Deferred tax assets.
Current assets
I. Inventories:
1. Raw materials, basic materials, and ancillaries.
2. Work in progress and orders.
3. Finished products and goods for sale.
4. Advance payments for inventories.
5. Fauna and flora:
a) animals and annual plantings;
b) biological assets.
6. Long-term investments held for sale.
II. Debtors:
1. Purchasers and commissioning party debts.
2. Related undertaking debts.
3. Associated undertaking debts.
4. Other debtors.
5. Shares not paid into company capital.
6. Short-term loans to stockholders or members, and
management.
7. Next period costs.
8. Accrued revenue.
III. Short-term financial investments:
1. Participation in the capital of related undertakings.
2. Own stocks and shares.
3. Other securities and participation in capital.
4. Derivative financial instruments.
IV. Cash.
Liabilities
Equity:
1. Stock or share capital (fixed capital).
2. Stock (share) issue premium.
3. Long-term investment revaluation reserve.
4. Fair value reserve of financial instruments.
5. Reserves:
a) reserves laid down in law;
b) reserves for own stocks or shares;
c) reserves laid down in the articles of association of the
undertaking;
d) reserves directed for the development;
e) foreign currency conversion reserve;
f) other reserves.
6. Retained profit or non-covered losses brought forward from
previous years.
7. Profit or losses for the reporting year.
8. Participatory share of minority stockholders.
Provisions:
1. Provisions for pensions and similar liabilities.
2. Provisions for contingent taxes.
3. Other provisions.
Long-term creditors:
1. Loans against debentures.
2. Loans convertible to stock.
3. Loans from credit institutions.
4. Other loans.
5. Prepayments received from purchasers.
6. Accounts payable to suppliers and contractors.
7. Bills of exchange payable.
8. Debts to related undertakings.
9. Debts to associated undertakings.
10. Taxes and mandatory State social insurance
contributions.
11. Deferred tax liabilities.
12. Other creditors.
13. Next period revenue.
14. Unpaid dividends.
Short-term creditors:
1. Loans against debentures.
2. Loans convertible to stock.
3. Loans from credit institutions.
4. Other loans.
5. Prepayments received from purchasers.
6. Accounts payable to suppliers and contractors.
7. Bills of exchange payable.
8. Debts to related undertakings.
9. Debts to associated undertakings.
10. Taxes and mandatory State social insurance
contributions.
11. Other creditors.
12. Next period revenue.
13. Unpaid dividends.
14. Accrued liabilities.
15. Derivative financial instruments.
Regulations for Using Certain Items
of the Balance Sheet Scheme:
1. The items "Investment properties", "Biological assets",
"Deferred tax assets", "Long-term investments held for sale", and
"Deferred tax liabilities" and also words "investment properties
and biological assets" in the title of the item group II shall be
used only by such undertaking, which by applying Section 13,
Paragraph five, Clause 2 of this Law according to the
international accounting standards recognises, assesses, and
reflects investment properties, biological assets, long-term
investments held for sale, deferred tax assets, or deferred tax
liabilities in the financial statement accordingly.
2. The item "Foreign exchange conversion reserve" and the item
"Participatory share of minority stockholders" shall be used only
in the consolidated annual statement.
Law on Annual Statements and
Consolidated Annual Statements
Annex 2
[11 November 2021]
Profit or Loss
Account Scheme in Vertical Format (classified according to types
of expenses)
1. Net turnover:
a) from agricultural activity;
b) from provided construction services;
c) from other types of principal activity.
2. Changes in stocks of finished goods and work in
progress.
3. Costs (capitalised) referenced to own long-term
investments.
4. Other revenue from economic activities.
5. Costs of materials:
a) costs of raw materials and ancillary materials;
b) other external costs.
6. Labour costs:
a) remuneration for work;
b) pensions from funds of the undertaking;
c) mandatory State social insurance contributions;
d) other social insurance costs.
7. Decrease in value adjustments:
a) adjustments of decrease in value of fixed assets and
intangible assets;
b) adjustments of decrease in value of current assets, if they
exceed write-off sums of such value which the relevant
undertaking considers as normal.
8. Other costs of economic activity.
9. Revenue from participation:
a) in the capital of related undertakings;
b) in the capital of associated undertakings;
c) in the capital of other undertakings.
10. Revenue from other securities and loans which formed
long-term financial investments:
a) from related undertakings;
b) from associated undertakings and other undertakings, and
also from securities and other long-term debtors.
11. Other revenue from interest and similar revenue:
a) from related undertakings;
b) from other persons.
12. Adjustments of reduction in the value of long-term and
short-term financial investments:
a) reduction in the value of participation in the capital of
associated undertakings;
b) adjustments of reduction in other value.
13. Interest payments and similar costs:
a) for related undertakings;
b) for other persons.
14. Profit or loss before enterprise income tax.
15. Enterprise income tax for the reporting year.
16. Profit or loss after calculation of enterprise income
tax.
17. Revenue or costs from changes in balances of deferred tax
assets or liabilities.
18. Extraordinary dividends.
19. Profit or losses for the reporting year.
20. Share of profit or loss of minority stockholders.
Provisions for Use of Certain Items
of Profit or Loss Account Scheme in Vertical Format (classified
according to types of expenses):
1. Item "Extraordinary dividends" shall be used, if any.
2. The items "Revenue or costs from changes in balances of
deferred tax assets or liabilities" shall be used only by such
undertaking, which by applying Section 13, Paragraph five, Clause
2 of this Law according to the international accounting standards
recognises, assesses, and reflects deferred tax assets or
deferred tax liabilities in the financial statement.
3. The item "Reduction in the value of participation in the
capital of associated undertakings", "Adjustments of reduction in
other value", and "Share of profit or loss of minority
stockholders" shall be used only in the consolidated annual
statement.
Law on Annual Statements and
Consolidated Annual Statements
Annex 3
[11 November 2021]
Profit or Loss
Account Scheme in Vertical Format (classified according to the
function of expenses)
1. Net turnover:
a) from agricultural activity;
b) from provided construction services;
c) from other types of principal activity.
2. Production cost price of produce sold, purchase costs for
goods sold or services provided.
3. Gross profit or loss.
4. Selling costs.
5. Administrative costs.
6. Other revenue from economic activities.
7. Other costs of economic activity.
8. Revenue from participation:
a) in the capital of related undertakings;
b) in the capital of associated undertakings;
c) in the capital of other undertakings.
9. Revenue from other securities and loans which formed
long-term financial investments:
a) from related undertakings;
b) from associated undertakings and other undertakings, and
also from securities and other long-term debtors.
10. Other revenue from interest and similar revenue:
a) from related undertakings;
b) from other persons.
11. Adjustments of reduction in the value of long-term and
short-term financial investments:
a) reduction in the value of participation in the capital of
associated undertakings;
b) adjustments of reduction in other value.
12. Interest payments and similar costs:
a) for related undertakings;
b) for other persons.
13. Profit or loss before enterprise income tax.
14. Enterprise income tax for the reporting year.
15. Profit or loss after calculation of enterprise income
tax.
16. Revenue or costs from changes in balances of deferred tax
assets or liabilities.
17. Extraordinary dividends.
18. Profit or losses for the reporting year.
19. Share of profit or loss of minority stockholders.
Conditions for Application of
Certain Items of Profit or Loss Account Scheme in Vertical Format
(classified according to the function of expenses):
1. Item "Extraordinary dividends" shall be used, if any.
2. The items "Revenue or costs from changes in balances of
deferred tax assets or liabilities" shall be used only by such
undertaking, which by applying Section 13, Paragraph five, Clause
2 of this Law according to the international accounting standards
recognises, assesses, and reflects deferred tax assets or
deferred tax liabilities in the financial statement.
3. The item "Reduction in the value of participation in the
capital of associated undertakings", "Adjustments of reduction in
other value", and "Share of profit or loss of minority
stockholders" shall be used only in the consolidated annual
statement.
Law on Annual Statements and
Consolidated Annual Statements
Annex 4
Cash Flow
Statement Scheme Prepared by Direct Method
I. Cash flow of principal
activity
1. Revenue from the sale of goods and provision of
services.
2. Payments to suppliers, employees, other expenses of
principal activity.
3. Other revenue or expenses of principal activity.
4. Gross cash flow of principal activity.
5. Expenses for interest payments.
6. Expenses for enterprise income tax payments.
7. Net cash flow of principal activity.
II. Investment activity cash
flow
1. Acquisition of stocks or shares of related undertakings,
associated undertakings, or other undertakings.
2. Revenue from alienation of stocks or shares of related
undertakings, associated undertakings, or other undertakings.
3. Acquisition of fixed assets and intangible assets.
4. Revenue from sale of fixed assets and intangible
investments.
5. Loans issued.
6. Revenue from repayment of loans.
7. Interest received.
8. Dividends received.
9. Investment activity cash flow.
III. Financing activity cash
flow
1. Revenue from stock and debenture issue or investments of
capital participatory shares.
2. Loans received.
3. Subsidies, grants, gifts or donations received.
4. Expenses for repayment of loans.
5. Expenses for purchase of leased fixed asset.
6. Disbursed dividends.
7. Financing activity cash flow.
IV. Result of fluctuations of
foreign currency exchange rates
V. Net increase or decrease in cash
and its equivalents
VI. Balance of cash and its
equivalents at the beginning of the reporting year
VII. Balance of cash and its
equivalents at the end of the reporting year
Law on Annual Statements and
Consolidated Annual Statements
Annex 5
Cash Flow
Statement Scheme Prepared by Indirect Method
I. Cash flow of principal
activity
1. Profit or loss before enterprise income tax.
Corrections:
a) corrections of decrease in value of fixed assets;
b) corrections of decrease in value of intangible assets;
c) creation of reserves (except reserves for bad debts);
d) profit or loss from fluctuations of foreign currency
rates;
e) revenue from participation in fixed capital of related
undertakings, associated undertakings, or other undertakings;
f) revenue from other securities and loans which formed
long-term financial investments;
g) other revenue from interest and similar revenue;
h) corrections of reduction in value of long-term and
short-term financial investments;
i) interest payments and similar costs.
2. Profit or loss before corrections of influence of changes
in balances of current assets and short-term creditors.
Corrections:
a) increase or decrease in balances of debts of debtors;
b) increase or decrease in balances of stocks;
c) increase or decrease in balances of debts to be paid to
suppliers, contractors, and other creditors.
3. Gross cash flow of principal activity.
4. Expenses for interest payments.
5. Expenses for enterprise income tax payments.
6. Net cash flow of principal activity.
II. Investment activity cash
flow
1. Acquisition of stocks or shares of related undertakings,
associated undertakings, or other undertakings.
2. Revenue from alienation of stocks or shares of related
undertakings, associated undertakings, or other undertakings.
3. Acquisition of fixed assets and intangible assets.
4. Revenue from sale of fixed assets and intangible
investments.
5. Loans issued.
6. Revenue from repayment of loans.
7. Interest received.
8. Dividends received.
9. Investment activity cash flow.
III. Financing activity cash
flow
1. Revenue from stock and debenture issue or investments of
capital participatory shares.
2. Loans received.
3. Subsidies, grants, gifts or donations received.
4. Expenses for repayment of loans.
5. Expenses for purchase of leased fixed asset.
6. Disbursed dividends.
7. Financing activity cash flow.
IV. Result of fluctuations of
foreign currency exchange rates
V. Net cash flow of the reporting
year
VI. Balance of cash and its
equivalents at the beginning of the reporting year
VII. Balance of cash and its
equivalents at the end of the reporting year
Law on Annual Statements and
Consolidated Annual Statements
Annex 6
[7 December 2017]
Statement
Scheme of Changes in Equity
I. Stock or share capital (fixed
capital)
1. Amount indicated in the balance sheet of the previous
year.
2. Correction of the amount indicated in the balance sheet of
the previous year.
3. Increase/decrease in stock or share capital (fixed
capital).
4. The amount indicated at the end of the period in the
balance sheet of the reporting year.
II. Stock (share) premium
account
1. Amount indicated in the balance sheet of the previous
year.
2. Correction of the amount indicated in the balance sheet of
the previous year.
3. Increase/decrease in stock (share) premium account.
4. The amount indicated at the end of the period in the
balance sheet of the reporting year.
III. Long-term investment
revaluation reserve
1. Amount indicated in the balance sheet of the previous
year.
2. Correction of the amount indicated in the balance sheet of
the previous year.
3. Increase/decrease in the balance of long-term investment
revaluation reserve.
4. The amount indicated at the end of the period in the
balance sheet of the reporting year.
IV. Fair value reserve of financial
instruments
1. Amount indicated in the balance sheet of the previous
year.
2. Correction of the amount indicated in the balance sheet of
the previous year.
3. Increase/decrease in the balance of the fair value reserve
of financial instruments.
4. The amount indicated at the end of the period in the
balance sheet of the reporting year.
V. Reserves
1. Amount indicated in the balance sheet of the previous
year.
2. Correction of the amount indicated in the balance sheet of
the previous year.
3. Increase/decrease of the balance of the reserves.
4. The amount indicated at the end of the period in the
balance sheet of the reporting year.
VI. Retained profits
1. Amount indicated in the balance sheet of the previous
year.
2. Correction of the amount indicated in the balance sheet of
the previous year.
3. Increase/decrease in retained profit.
4. The amount indicated at the end of the period in the
balance sheet of the reporting year.
VI.1 Participatory share
of minority stockholders
VII. Equity
1. Amount indicated in the balance sheet of the previous
year.
2. Correction of the amount indicated in the balance sheet of
the previous year.
3. The amount indicated at the end of the period in the
balance sheet of the reporting year.
Implementing provision of the
statement scheme of changes in equity:
chapter "VI.1 Participatory share of minority
stockholders" shall be used only in the consolidated annual
statement.
1The Parliament of the Republic of
Latvia
Translation © 2023 Valsts valodas centrs (State
Language Centre)
