It will soon be time for companies whose financial year ends on 31 December to file their annual accounts and annual report. Given the current pandemic, it is extra important to be aware of the company's finances and possible risks. To ensure a smooth end of year, influence outcomes, and give our customers the best possible advice, here at Azets we’ve a few tips to bear in mind before you file your annual accounts.
A company’s profit or loss determines the amount of work required on the annual accounts
The company profit or loss is affected by whether receivables need to be written down, whether all liabilities are included, risk assessments and whether there are untaxed reserves such as accruals.
Keep the following in mind to get the most accurate result:
- Is the accounts receivable updated and have you reviewed whether there are any accounts receivable that are doubtful, i.e. does the customer not pay despite several reminders? Then you should book a reserve for doubtful accounts receivable.
- If the market value has fallen in financial fixed assets or short-term investments, for example for shares or depots, revaluation must take place at current value.
- Check that all debts have been booked and that there are reserves for uninvoiced costs.
- Do not forget to reserve for employees' holidays, accrued salaries and overtime.
- Go through if there are any disputes with suppliers or if there are agreements or other costs that need to be taken into account.
- If the company has reserves for warranty commitments, then perhaps the reserves need to be adjusted in the financial statement.
- Also, do not forget about revaluations of liabilities and receivables in foreign currency.
- Previously set-aside accrual funds that are older than six years must be returned now and you can also make new provisions to ensure the company's future results.
If your company turns a profit
Small business owners should contact their accounting or payroll consultant and check that they are taking out the correct salary for calculating the salary basis for low-taxed dividends.
Provisions for accruals are still an alternative for reducing the result for the year if you already see seasonal variations and possibly reduced income in the event of an economic downturn.
Things to think about if your company turns a loss
If the company is turning a loss, you need to think about a few more things in addition to the above:
- Review the costs in the company and see if there is anything that can be activated. Maybe you have booked the cost of something that has not provided income yet? But be observant of the different regulations for the annual report, K2 or K3.
- Small business owners can write off debts as holiday debt to owners or convert debts into conditional shareholder contributions.
And resolution of:
- Previous reserves for over-depreciation
- Previously allocated accruals? It is an easy way to use this year's deficit to reduce the tax on previous surpluses.
Formalia for the Swedish Companies Act (ABL) and control balance sheet
Check whether the regulations for the control balance sheet have been complied with accordingly. If the ordinary activities are not sufficient to restore the capital, consideration should also be given to whether shareholder contributions are needed. In this way, the parent company or owner is prepared if the question would arise.
Keep track of tax changes and key calendar dates
It’s worth noting that the corporate tax rate is reduced to 21.4% for companies whose financial year started on 1 January 2019. The corporate tax rate will be reduced further to 20.6% on 1 January 2021.
In addition, it’s a good idea to keep track of key dates that affect the annual accounts and annual report. Your accounting consultant here at Azets knows all the key dates and will contact you in good time should anything be needed in order to complete the annual accounts and submit your annual report. We still recommend that you keep some reminders in your calendar to ensure you have a good overview of what’s happening when. This can also be handy ahead of any information requests from your accounting consultant.
If there’s anything you’re unsure of, just get in touch in good time before the end of the year to discuss your company’s results with your accounting consultant. We’ll offer the best advice and information we can about expected developments for your company.