Accounting in Europe - Year-End Closing Checklist
As year-end approaches, it’s crucial for any company with business in Europe to comply with the annual accounting reporting requirements. Not only does this regularly pose a challenge for new and growing businesses, but even those who have established themselves on the continent can struggle when regulation changes are considered.
From reconciling bank statements and filing taxes to preparing and filing financial documents, there are strict requirements in Europe. Use this checklist to prepare yourself for the year-end.
Filing Deadlines and Format Changes
Companies that have territories additional to Europe need to comply with group reporting, which are different from local financial statements. It is important to be aware of the group reporting requirements as they are often stricter. Overseas employers have their task cut out when it comes to year-end closing.
Statutory Audit and Consolidation Requirements
Most European Union countries require statutory audits and consolidation of accounts. There are country-specific mandates regarding the number of employees, assets, and turnover. Be sure your team is aware of these items.
Fine Points of Closing Balance
Your Balance Sheet only reflects the value of assets, liabilities and other financial details. It doesn’t help validate various account balances. Therefore, it is easy to overlook Accounts Receivable and Accounts Payable as they are not mentioned in financial statements.
Ensure these accounts are accurate. For example, if your Accounts Receivable contains an entry where the Client is not going to pay due to an ongoing dispute, write off that balance. Similarly, some accounts you must confirm their reasonableness. See the below list.
Loans and Lines of Credit
Sales Tax Liabilities
Checking and Savings
Deferred and Unearned Revenue
Year End Inventory
Year-End and Other Adjustments
In Europe, International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Practices (GAAP) are applied and treated differently in some countries. Note any adjustments that are required for compliance. Some examples are listed.
- In Portugal, the Netherlands, and Italy you do not need to prepare cash flow statements. However, they are mandatory in France and Germany as a part of consolidated accounts or for any company listed in the stock markets.
- A comprehensive income statement is non-existent in Norway, Poland, Portugal, Germany, and France. On the other hand, some countries mandate income statements for SMEs that must be consistent with IFRS.
- A group-based approach to estimates can differ from local estimates for pension cost, bonus, holiday accruals, contingencies, provisions, and so on. For example, the Netherlands allows making a provision with no obligation. Italy and Germany allow provisions for a whole variety of risks.
- For balance sheet adjustments, Germany mandates “strict adoption of knowledge” for filing. Adjustments are allowed only when foreseeable risks cause losses and are known between the balance sheet date and the date of filing financial statements. The Netherlands allows adjustments when a company distributes profits, as the year-end proposed dividends become current liabilities.
- Revaluation options are available in the Netherlands, Poland, Romania, and Portugal.
Changes in legislation can impact group reporting just as they affect accounting methods and filing procedures. So, keep tabs on the changes introduced since the last year-end.
Eliminate Legal Liability
Make sure your closing financial statements are filed after incorporating the year-end corporate secretarial requirements. These requirements need to be evaluated for the inter-dependencies they may create. It can be easy to neglect the legal aspects even though its ramifications can be as serious as a major accounting or filing error.
Hiring international accounting professionals with expertise in compliance simplifies the intricacies of financial requirements. A PEO that specializes in global expansion of growing companies will make sure you get your year-end close right. Learn more about our solutions.