Swedish company audit, financial statements, accounting, consulting in the Sweden

Requirements regarding accounting and audit of financial statements are set out in the Swedish Annual Reports Act 1995 (Årsredovisningslagen) and the Accounting Act 1999 (Bokföringslagen).

Sweden’s financial supervisory authority (Finansinspektionen) is responsible for the issue of standards necessary for financial companies. The financial reporting standards are based on EU Directives.

All companies must keep accounting records even if they do not conduct business.

An annual report must contain:

• directors’ report;
• profit and loss statement;
• balance sheet;
• notes;
• approval of financial statements (certifying that the balance sheet and profit and loss statement have been approved at a meeting of shareholders);
• auditor’s report (if the limited liability company has an auditor or if the company is a parent company of a group of companies);
• cash flow statement (if the limited liability company has an auditor);
• consolidated accounts (if the company is a parent company for a group of companies).

An annual report is a public document that shall be filed with the Swedish Companies Registration Office (Bolagsverket).

The BFN (the Swedish Accounting Standards Board) has established four tiers of financial reporting in Sweden (K1, K2, K3, and K4) based on the size and other characteristics of the company:

K1 – individual entrepreneurs whose annual turnover does not exceed 3 000 000 SEK are allowed to prepare simplified annual financial statements.

K2 – a simplified standard for small limited liability companies and cooperatives as well as for some forms of associations and partnerships.

Small enterprise means a reporting unit that does not exceed more than one of the three thresholds on the reporting date for 2 reporting periods:

1. balance sheet total is more than 1 500 000 SEK;
2. net turnover is more than 3 000 000 SEK;
3. average number of employees is more than 3.

K3 – companies that are large:

1. balance sheet total is more than 40 000 000 SEK;
2. net turnover is more than 80 000 000 SEK;
3. average number of employees is 50 or more.

K4 – companies that prepare consolidated financial statements in accordance with the IFRS adopted by the EU.

According to the regulations, accounting records must be kept for at least 7 years. Some documents are required to be kept even longer, for example documents containing information on the purchase of real estate.

A limited liability company in Sweden can choose the Swedish krona (SEK) or euro (EUR) as the accounting currency. The accounting currency must be stated in the articles of association.

Financial year must consist of 12 months. The first financial year can be shorter than 12 months or extended to 18 months. When a company terminates its activity, the financial year can be shortened but not extended.

Limited liability companies and economic associations can choose either a calendar year or a split financial year. A split financial year begins on the first day of any calendar month, covers 12 full months, and ends on the last day of a calendar month (for example, from 1 September to 31 August).

A company must file its annual report with the Swedish Companies Registration Office (Bolagsverket) within 7 months after the end of the company’s financial year.

Consolidated financial statements are combined financial results of a group of companies. Only the parent company can prepare consolidated financial statements.

If an annual report contains consolidated accounts, the company must provide an auditor’s opinion on the consolidated accounts.

Companies that make consolidated financial statements correspond to the tier K4 in accordance with the BFN (the Swedish Accounting Standards Board) and must use the International Financial Reporting Standards adopted in the EU.

A parent enterprise that is a subsidiary is not required to prepare consolidated financial statements if:

1. the company and all its subsidiaries are subordinate to the consolidated financial statements made by the parent company, and
2. the parent consolidated financial statements of the parent company were prepared and reviewed in accordance with:

• the legislation prepared in accordance with Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013;
• the international financial reporting standards, in accordance with Regulation (EC) No. 1606/2002 of 19 July 2002;
• accounting standards that the European Commission deems to be equivalent to the international accounting standards.

A parent company that does not make consolidated financial statements, however, must provide consolidated financial statements of the parent company and an auditor’s report to the Registrar.

Consolidated financial statements must consist of:

1. consolidated balance sheet,
2. consolidated profit and loss statement,
3. notes,
4. management report, and
5. cash flow statement.

Small groups do not require consolidation of financial statements if none of the companies is a public interest entity.

Small group is a reporting unit that does not exceed more than 1 of the 3 thresholds on the reporting date for 2 reporting periods:

• balance sheet total is more than 1 000 000 SEK;
• net turnover is more than 3 000 000 SEK;
• average number of employees is more than 3.

A subsidiary is not required to be included in consolidated financial statements if:

1. tough long-term restrictions substantially limit the parent company’s ability to influence the subsidiary,
2. information necessary for the financial statements cannot be obtained without unjustified expenses or within a reasonable time, or
3. the subsidiary’s shares are provisionally and exclusively for resale.