Audit of a Estonian company, financial statements, accounting, consulting in Estonia

Accounting in Estonia is regulated by the Accounting Act. Accounting rules and forms of financial statements must comply with the Estonian generally accepted accounting principles or international financial reporting standards approved by the European Commission.

Financial statements must include the main reports:

• Directors’ report,
• Balance sheet,
• Profit and loss statement,
• Cash flow statement,
• Statement of changes in equity,
• Notes to accounts.

Annual reports shall be in Estonian and in euros (EUR).

In accordance with the Accounting Act, companies are classified into different categories depending on reporting figures on the reporting date.

Annual reports must be filed with the Commercial Register even if the company did not make transactions in the financial year.

According to the Accounting Act, micro and small enterprises can, based on the Estonian financial reporting standard, make a condensed annual report instead of a full annual report, including at least two main reports (balance sheet and profit and loss statement) and notes to accounts.

Medium-sized and large enterprises must make their annual report in full. A full annual report is also compulsory for non-profit associations and foundations.

Annual reports must be presented in electronic form via the e-business register.

Books of accounts, ledgers, contracts, financial statements, reports and other business documents necessary to reconstruct business transactions during inspections must be kept by the accounting entity during 7 years as of the end of the relevant financial year.

A company’s financial year lasts 12 months. Financial year normally coincides with calendar year (from 1 January to 31 December), but a different financial year can be stated in the company’s articles of association. When selecting the most suitable financial year it should be taken into account that the selected 12 consecutive months should correspond with the operating cycle of the accounting entity. Financial year must always start on the first day of a month and end on the last day of a month (for example, it starts on 1 January and ends on 31 December).

The deadline for filing an annual report in Estonia is 6 months after the end of the financial year.

According to the Accounting Act, an enterprise that has at least one subsidiary must prepare a consolidated annual report of the group of companies.

A group of companies consists of a consolidating enterprise (parent enterprise) and consolidated enterprises (subsidiaries).

Small consolidated groups are not required to present a consolidated report.

Small consolidated group is a consolidated group where at most one of its consolidated figures exceeds conditions set for small enterprises on the date of the balance sheet of the reporting year:

1. assets are 4 000 000 EUR;
2. annual sales revenue is 8 000 000 EUR;
3. average number of employees is 50.

Furthermore, the following companies are exempt from the obligation to prepare a consolidated annual report of the group of companies:

• consolidating entity; in this case its consolidated figures without deduction of mutual transactions do not exceed figures of the balance sheet amount and net turnover of the small consolidated group plus 20%;
• consolidating entity; in this case the aggregate amount of the balance sheet totals of consolidated entities does not exceed 5% of the balance sheet amount of the consolidating entity, and their sales revenue does not exceed 5% of the sales revenue of the consolidating entity;
• company; in this case all or at least 90% of its shares are held by the consolidating company incorporated in the European Union that must prepare and disclose an audited annual report of the consolidated group.

Medium-sized and large consolidated groups of companies must prepare full consolidated financial statements.