Annual reports (incl. financial statements) in Latvia

The annual report is obligatory for all undertakings operating in Latvia and it must conform to the form established in legislation. The annual report consists of the annual accounts and the management report.

Financial year

A company’s financial year is 12 months long. A financial year generally coincides with the calendar year (1 January-31 December), but a company’s articles of association may specify a different financial year.
When a company is established, dissolved, or the beginning date of the financial year changed, the financial year may in these exceptional cases be shorter or longer than 12 months, but not longer than 18 months.

Stages of preparing an annual report:

1. Preparing the annual accounts
2. Preparing the management report
3. Review by a public accountant
4. Preparing the profit distribution and decision to distribute profit and cover loss;
5. Submitting the annual report for approval.

Financial statements

The financial statements must give a true and fair view of the company’s financial position and the results of its operations and cash flows. The annual report consists of basic reports (balance sheet, income statement, cash flow report and statement of changes in equity) and notes. The annual accounts must be prepared in Latvian and the denomination used must be euro.

1. Balance sheet and income statement
The balance sheet is a view of the company’s financial situation (assets, liabilities and equity as of the end of the financial year). The income statement lists the income and expenses and is a view of the company’s operating results during the reporting period (income, expenses and profit or loss).

2. Cash flow statement
The cash flow statement is a view of the company’s cash flows during the reporting period (receipts of cash and cash equivalents and disbursements). In this statement, you indicate the receipts and expenditures during the reporting period, grouped according to their purpose as cash flow from operating activities, investing activities and financing activities.

3. Statement of changes in equity
The Statement of changes in equity is used to recognize changes in the company’s equity during the reporting period. You are required to record separately any contributions of capital made by the owners and disbursements made to owners, profit or loss for the reporting period, impact of changes in accounting policies, increase and decrease of reserves and other economic transactions that impacted equity entries.

4. Notes to the annual accounts
The number of notes in the annual report depends on the particular company, but the following must certainly be added to the report:

• explanation as to the accounting practice used for preparing the annual report;
• the accounting polices used for preparing the annual report;
• explanations regarding to key entries and changes in them during the reporting period.

Management report

The management report provides a sufficiently thorough overview of the Company’s activity and circumstances that are of material importance to evaluating the Company’s financial condition and economic activity, key events in the financial year and forecasted development trends in the next financial year.

Review of annual report by an auditor

An auditor’s report must be appended to the annual report, if your company was required to undergo an audit. An auditor’s report must be appended to the annual report of an organisation subject to accounting requirements who meets at least two of the following three conditions:

• annual net sales of 3 400 000 euros and more;
• balance sheet volume of 1 400 000 euros and more;
• average number of employees is at least 250.

Filing the annual report

Legal entity is required to file the annual report with the Commercial Register:

• Within 4 months after the end of the reporting year, if the company does not exceed two of the following conditions: Total assets – 1 400 000 EUR;  net turnover – 3 400 000 EUR; average number of employees - 250;
• Within 4 months after the end of the reporting year, if the company does exceed two of the following conditions: Total assets – 1 400 000 EUR;  net turnover – 3 400 000 EUR; average number of employees - 250;