Spanish company audit, financial statements, accounting, consulting in Spain

Audits in Spain are required for all public companies, financial institutions, insurance undertakings and brokers, as well as for companies that exceed statutory thresholds for total assets, turnover or employee headcount. Financial statements are prepared in accordance with the Spanish General Accounting Plan (Plan General de Contabilidad, PGC) and filed with the Commercial Registry. Small companies may prepare abridged accounts for which an audit is not required. Our audit services cover bookkeeping, preparation and filing of financial statements, coordination and conduct of audits, liaison with tax authorities and assistance with CFC reporting.

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Legal requirements

As a member of the European Union (EU) Spain is subject to the accounting, audit and financial reporting requirements set in EU regulations and directives implemented into national laws and regulations.

The Commercial Code imposes the obligation on companies to keep books of accounts and provides the basic legal framework for accounting. According to the Commercial Code, all companies must make financial statements in accordance with the General Accounting Plan of Spain (GAAP of Spain) and file them with the Commercial Register.

Companies incorporated in Spain must prepare and file annual financial statements in accordance with the chronological order of all transactions. According to provisions of the Commercial Code, balance sheets and inventories must be made periodically. The following documents must be kept:

book of inventory (interim and final balance sheet for every 3 months);
annual accounts (balance sheet, profit and loss statement, statement of changes in equity, cash flow statement, notes);
registers of financial transactions (they show the company’s day-to-day transactions).

Financial statements include a balance sheet, profit and loss statement, statement of changes in equity, cash flow statement and notes to accounts.

All companies in Spain must file financial statements with regulatory authorities. The following legal forms of business entities must file financial statements:

Sociedad de Responsabilidad Limitada or S.R.L. (limited liability company);
Sociedad Anónima or S.A. (joint-stock company);
Sociedad Colectiva (general partnership);
Sociedad Comanditaria (limited partnership).

Spanish companies can prepare a condensed balance sheet and statement of changes in equity if at least two of the following criteria are met on the date of the end of the period in the last two financial years:

total amount of assets does not exceed 4 000 000 EUR;
net annual turnover does not exceed 8 000 000 EUR;
average headcount of employees during the financial year is not more than 50.

It is worth noting that when preparing condensed statements (balance sheet and statement of changes in equity), there is no requirement to prepare a cash flow statement.

A profit and loss statement can also be prepared in condensed form if at least two of the following criteria are met on the date of the end of the period in the last two financial years:

total amount of assets does not exceed 11 400 000 EUR;
net annual turnover does not exceed 22 800 000 EUR;
average headcount of employees during the financial year is not more than 250.

Companies also have the right to prepare condensed statements (balance sheet, statement of changes in equity and profit and loss statement) for their first financial year if on the date of its end 2 of the above criteria are met.

Audit

Financial statements of Spanish companies must be audited, except for condensed reports on the company’s activity.

Law 22/2015 requires all public companies, including, but not limited to, listed companies, credit institutions, insurance companies and financial broker companies, to be audited and appoint an external auditor. Furthermore, companies that meet at least 2 of the following characteristics during 2 consecutive years must audit their financial statements:

total amount of assets does not exceed 2 850 000 EUR;
net annual turnover does not exceed 5 700 000 EUR;
average headcount of employees during the financial year is not more than 50.

Time frame for preparation and submission of accounts

Publication of accounts by the regulatory authority is annual and compulsory. Directors of a company have 3 months after the financial year-end closing to prepare accounts. Accounts must give a reliable representation of the company’s activity and be signed by all directors of the company. If any of the signatures is absent, accounts must contain a detailed explanation of the reason why.

Reports on the results of the company’s activity must be presented for approval at an annual general meeting of shareholders, and within 1 month after their approval they must be filed with the Commercial Register along with the resolution of the general meeting of shareholders. This information is available to the public, and the Commercial Register keeps the received documents for 6 years.

An annual profit tax return shall be filed within 6 months and 25 days after the end of the tax year.

Liability for late filing of accounts

Non-fulfilment of the obligation to file information with the Commercial Register by the set deadline results in a penalty of 1 200 to 60 000 EUR. The amount of the penalty is determined based on the company’s size in terms of total assets and turnover for the latest financial year for which the statements have been filed.

If the company’s annual turnover exceeds 6 000 000 EUR, the maximum amount of the penalty for each year of the delay is 300 000 EUR.

If accounts are filed before the penalty accrues, its amount will be 50% of the minimum threshold.

Consolidated accounts

Standards on consolidated financial statements were approved by Royal Decree 1159/2010 of 17 September in the process of the adoption of Spanish legislation on accounting in accordance with EU legislation.

Frequency Asked Questions

How is accounting regulated in Spain?

Accounting in Spain is governed by the Commercial Code, which requires the keeping of accounting books and the preparation of financial statements, and by the General Accounting Plan (Plan General de Contabilidad, PGC) — the Spanish GAAP that sets out accounting rules and reporting formats, including the balance sheet, profit and loss account, statement of changes in equity and cash flow statement. Spain implements EU directives on accounting and auditing, and Law 22/2015 establishes mandatory statutory audits for public companies, credit institutions and insurance undertakings, as well as for companies exceeding prescribed thresholds for assets, turnover or employee headcount; small companies are permitted to prepare abridged accounts.

Does Spain follow IFRS or GAAP?

Spain applies a national accounting framework — Spanish GAAP (the Plan General de Contabilidad). However, public companies and consolidated groups listed on regulated markets are required to prepare their financial statements in accordance with IFRS as adopted by the EU.

What is the GAAP in Spain?

In Spain, the generally accepted accounting principles (GAAP) are called Plan General de Contabilidad (PGC). The PGC sets out the accounting principles and rules that companies must follow when preparing their financial statements. It provides guidance on issues such as the presentation of financial statements, the recognition and measurement of assets and liabilities, and the disclosure of information in the financial statements. The PGC is based on the European Union's Accounting Directives and is periodically updated to reflect changes in international accounting standards.

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