Notes to the financial statements
The purpose of the financial statements is to give a true and fair view of the company’s operations and financial state. The notes complete this correct and adequate picture. The notes provide information that does not appear in the income statement and balance sheet.
The notes on a small business must mention the following events in the company’s operations:
- Justification, if the presentation of the income statement or balance sheet has changed in the previous year’s financial statements. In addition, the effects of these changes are reported.
- Adjustments which have been made to previous years’ data.
- An explanation of the basis on which inventories, intangible rights, development costs, goodwill or other long-term expenses have been capitalized.
- Mention if the long-term production is recorded as profit based on the stage of completion.
- Indication if financial instruments or investment properties are stated at a fair value which is higher than the acquisition price.
- Indication if receivables, liabilities and other liabilities denominated in foreign currencies have been converted into euros, using a rate other than the exchange rate at the balance sheet date.
- Fixed assets (machinery and equipment) must be disclosed if:
- Indirect costs or interest costs arising from the acquisition and manufacture have been included in the purchase price,
- The depreciation plan is some other than the maximum depreciation of the taxpayer (machinery and equipment -25% of residual depreciation)
- Grants received have not been deducted from the acquisition cost
- Low-value assets, as well as assets with an estimated useful life of less than three years, have been capitalized in the balance sheet.
- Assets acquired under finance leases are recorded in the balance sheet,
- Mention if the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
- Mention exceptional income and expense items.
- Mention of significant events after the financial year.
- Mention of the appreciation made to fixed assets.
- If financial instruments or investment properties are recorded at fair value, additional information must be provided for them.
- Derivatives must be stated at fair value at the balance sheet date.
- Amount of long-term loans maturing after more than five years
- Mention of guarantees provided by the company
- Statement of financial commitments not shown in the balance sheet (e.g., the notice period for leases)
- Mention of pension liability not given to the pension insurance company.
- Name and domicile of the parent company of the group to which the company belongs, and which is the subject of the consolidated financial statements.
- Loans to and commitments made to and on behalf of the CEO and members of the governing bodies.
- Information on transactions between the company and its stakeholder that have not been made on normal commercial terms.
- Significant routine transactions with stakeholders should also be mentioned.
- Average number of staff during the financial year
- Mention if the company has acquired or transferred its own shares.
- An indication of whether a dividend will be distributed and, if so, how much.
All relevant facts must also be mentioned as notes to obtain a true and fair view of the company’s financial condition and operations.