Simplified accounting principles – annual accounts and auditor’s reports for other forms of business enterprise than limited liability companies, financial years starting after 31 December 2006

Content

Bolagsverket receives many questions regarding the Annual Accounts Act (ÅRL) and the Bookkeeping Act (BFL). In most cases the enterprises have questions regarding the contents of the legislation, etc. when preparing the annual accounts, the consolidated accounts and the interim report. We also receive questions and viewpoints from business partners, competitors, trade unions, employees and others, who are buying copies of annual accounts from us. In the following material the new simplified accounting principles are described from Bolagsverket’s point of view.

The background for the following information

During the last years Bolagsverket has received more and more questions regarding late preparation and late filing of annual accounts. The reason for the increased number of questions may be the discussions of a judgement passed by the Supreme Court (Högsta domstolen) (NJA 204:618) about bookkeeping crime regarding the too late preparation of the annual accounts.

Questions have also come to our attention through our staff’s involvement and participation in different courses and meetings. Wishes have been expressed that we shall summarize information about our experiences on the Annual Accounts Act and the requirements which we have for the annual accounts to be approved by us. If you have any comments on the contents you are welcome to contact us.

News for financial years starting after 31 December 2006

The Swedish Parliament (Riksdagen) has decided on simplified accounting principles for enterprises. The new provisions take effect as of 1 January 2007 and are applicable to financial years starting after 31 December 2006. In this information sheet the new accounting principles are described from Bolagsverket’s point of view. Information about the old provisions can be found in the information sheet no. 829 vge.

Which enterprises are obliged to file annual accounts with Bolagsverket?

Limited liability companies, joint–stock banking companies, savings banks, membership banks, insurance companies and mutual insurance companies are always obliged to file their annual accounts and auditor’s reports with Bolagsverket. Bolagsverket also files accounts from branch offices of foreign enterprises in Sweden, economic associations, trading partnerships, limited partnerships and sole traders when applicable. See The Annual Accounts Act, Article 8 and the Bookkeeping Act, Article 6.

The new simplified accounting principles imply that fewer enterprises are obliged to prepare and file annual accounts and auditor’s reports with Bolagsverket. All business enterprises, obliged to prepare annual accounts, must observe the regulations as stipulated in the Annual Accounts Act (1995:1544), with the exception, though, of credit institutions, securities companies and insurance companies which must observe the regulations as stipulated in the Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL 1995:1559) and the Annual Accounts Act for Insurance Companies (ÅRFL 1995:1560).

Please note that trading partnerships and limited partnerships with a legal entity as one of the partners are obliged to prepare annual accounts and file them together with the auditor’s report with Bolagsverket.

In appendix 1 Bolagsverket gives a specification of the different forms of business enterprise which need to prepare and file annual accounts and auditor’s reports with the authority.

In the following we shall describe the news in the new legislation as well as give you some advice and directions before filing the annual accounts, the consolidated accounts, auditor’s reports and interim reports with Bolagsverket. The new legislation contains simpler provisions principally within the area of the accounting legislation for small–sized enterprises. The enterprises and the groups of enterprises are divided into two categories: small–sized and large enterprises, small–sized and large groups, respectively; see the definitions of the categories below.

Large enterprises

An enterprise fulfilling more than one of the following three criteria is regarded ”large”:

• The average number of employees of the enterprise has during each of the two most recent financial years exceeded 50.
• The value of the assets of the enterprise according to the balance sheet total has for each of the two most recent financial years exceeded 25 million kronor.
• The net turnover of the enterprise has for each of the two most recent financial years exceeded 50 million kronor .

Always to be regarded large is an enterprise of which the shares, subscription options or debt instruments are listed at a stock exchange, an authorized market place or any other regulated market.

Credit institutes, securities companies and insurance enterprises must apply the provisions of the Annual Accounts Act, applicable for large enterprises regardless of the number of employees, balance sheet total and net turnover, unless otherwise specially mentioned in the Annual accounts act of credit institutes and securities Companies or the Annual accounts act of insurance Companies.

Small–sized enterprises

All other enterprises are regarded belonging to the category ”small–sized enterprises”.

Large groups of enterprises

A group of enterprises fulfilling more than one of the following three criteria is regarded ”large”:

• The average number of employees of the group of enterprises has during each of the two most recent financial years exceeded 50.
• The reported balance sheet total of the entire group of enterprises has for each of the two most recent financial years exceeded 25 million kronor.
• The reported net turnover of the entire group of enterprises has for each of the two most recent financial years exceeded 50 million kronor.

When applying this principle receivables and liabilities, as well as intra–group profits, between group enterprises must be eliminated. The same applies to revenues and costs referring to transactions between enterprises within the group, as well as changes of the intra–group profits.

Credit institutes, securities companies and insurance enterprises must apply the provisions of the Annual Accounts Act, applicable for large groups of enterprises, regardless of the number of employees, balance sheet total and total net turnover, unless otherwise specially mentioned in the Annual Accounts Act for Credit Institutes and Securities Companies and the Annual Accounts Act for Insurance Companies.

Small–sized groups of enterprises

Groups of enterprises which are not large groups are considered small–sized groups of enterprises.

General advice of Bokföringsnämnden, the Swedish Accounting Standards Board

For more information on the different categories and interpretations of the same, see the general advice of the Swedish Accounting Standards Board ”Gränsvärden” (Limited values) (BFNAR 2006:11) which may be ordered from the Swedish Accounting Standards Board’s website, www.bfn.se.

All enterprises which do not prepare annual accounts must for each financial year conclude the current recording with a closing of the accounts (årsbokslut). If the annual net turnover amounts to at least three million kronor, the enterprise may prepare a simplified accounts (see Article 6, section 3 of BFL). The simplified accounts shall consist of a profit and loss statement and a balance sheet. For further information, see Bokföringsnämnden’s advice ”Enskilda näringsidkare som upprättar förenklat årsbokslut” (Sole traders who prepare simplified accounts); the information is available from the Bokföringsnämnden website.

Advice and directions before the accounting documents are filed with us

The following may be considered a checklist with directions and advice before sending in the documents to Bolagsverket.

The accounting documents must be filed as one single document, preferably stapled in the upper left corner. The document must contain certified copies of the original of these documents and preferably assembled in the following order

1. Annual accounts and consolidated accounts, if any, including certificate of adoption (fastställelseintyg)
2. Auditor’s report
3. Enclosed consolidated accounts with auditor’s report (for superior consolidation, see under the heading Consolidated accounts)

Bolagsverket does not accept annual accounts filed as a so–called catalogue as these annual accounts are not always complete, and furthermore they are difficult to scan and copy (as a black and white copy).

Bear in mind

• The annual accounts must be filed as a certified copy of the original. Please observe that the original of the annual accounts and the auditor’s report must be kept with the enterprise.
• The registration number of the enterprise must be stated both on the annual accounts and on the auditor’s report. The registration number should be stated in the upper right corner, preferably on each page of the annual accounts.
• The registered business name of the enterprise must be stated in full. It is not sufficient to state an abbreviation or a popular version of the business name. On the first page of the annual accounts (and at least also in the directors’ report) the complete business name should be stated.
• The financial year of the business enterprise should be clearly stated in the annual accounts and in the auditor’s report, preferably according to the following principle: 2006-01-01 – 2006-12-31.
• Currency and unit of currency must clearly be mentioned when amounts are stated, e.g. kr (kronor), tkr or kkr (thousand kronor), mkr or mnkr (million kronor).
• As the annual accounts and the auditor’s report will be scanned in black and white, you should avoid colours or toned or shaded fields in the copies that are filed with Bolagsverket.
• It is important that we have the correct address of your enterprise in our registers, especially if we need to send you a letter asking for complementary information to the annual accounts. As changes of addresses for enterprises, board members and other officials of the enterprise are not always reported to Bolagsverket, we do not always have the correct information on postal addresses in our registers. Please note that the enterprise has a lawful obligation to report a change of address to us. A change of an address with e.g. Svensk adressändring AB or Skatteverket is not forwarded to Bolagsverket. Therefore, remember to report any change of address to us.

Directors’ report

Bear in mind

• Associations must always state proposal for appropriation of results in the directors’ report.
• The line of business of the enterprise must be stated in the directors’ report.

Profit and loss statement as well as balance sheet

The provisions of the Annual Accounts Act, Article 3, section 11 give the enterprise the possibility on its own to judge whether certain items in the profit and loss statement should be combined to one item, named gross profit or gross loss.

The requirements are the following

• The combination of items in the profit and loss statement must be motivated by reasons of competition.
• Information about the net turnover must be stated. This information may be omitted if it is motivated, and if Bolagsverket permits it; i.e. permission from Bolagsverket is required in this respect.
• The enterprise must in a note explain the reasons for the combination.

Banking companies, credit market enterprises, mortgage institutions and securities companies are not allowed to combine items in the profit and loss statement.

Bear in mind

• In the new legislation the balance sheet total is defined as the total assets.
• To check the balance sheet total, i.e. that the total assets = total shareholders’ equity, allocations and debts.
• To check that the profit and loss statement and the balance sheet are correctly added.
• To state the net turnover in connection with the gross profit or loss in the profit and loss statement, if the enterprise follows the procedure for abbreviated profit and loss statement.

Additional information (notes)

Bear in mind

• To check that the reasons of competition appear from the additional information pursuant to the Annual Accounts Act, Article 3, section 11 (if the enterprise applies the abbreviated form of the profit and loss account).
• A specification of shares and interests in consolidated and associated enterprises must be drawn up pursuant to the requirements of the Annual Accounts Act.
• A note regarding changes of the equity capital must be drawn up (e.g. in connection with profit distribution, when applicable).
• To check that it is clearly stated – when applicable – that reference is made to the special exemption provisions of the Annual Accounts Act, Article 7, section 2 to avoid preparing consolidated financial statements for the annual accounts and that the parent enterprise preparing the consolidated accounts is mentioned (by the business name, registration number and registered office).
• The enterprise must also state those enterprises which prepare consolidated accounts for the largest and the smallest group of which the enterprise is a part (information about the business name, registration number and registered office, and from where the consolidated accounts of the parent enterprise may be obtained).
• The enterprise must also mention the enterprises which prepare consolidated accounts for the largest and the smallest group of enterprises of which the enterprise is part (information on the business name, registration number and registered office).
• To check that it appears from the additional information that the reasons for the special exemption provisions of the Annual Accounts Act, Article 7, section 5 are applicable (i.e. if the enterprise exempts certain subsidiaries from the consolidated accounts).
• Details must be stated in the additional information on the employees’ absence due to sickness during the financial year. The sickness absence must be stated in percentage of the employees’ normal working hours. Specific details must be stated on the long–term absence for sickness, i.e. absence lasting more than a consecutive period of at least 60 days. Further, details on the sickness absence for women and men must be stated, as well as details for employees of certain age groups. Enterprises with an average of maximum ten employees during the two latest financial years are exempted from the obligation to state details on the sickness absence. Certain other limitations of the obligations to state information may occur.
• Details must be stated in the additional information regarding the number of women and men in the management; this must be stated as a percentage of the management. Enterprises with an average of maximum ten employees during the two most recent financial years are exempted from the obligation to state these details.

To bear in mind regarding signatures and certificate of adoption (fastställelseintyg) for associations

• The annual accounts must be signed by all the board members of the latest elected board (i.e. the board of directors already elected by the association at the date of signing) as well as by the managing director. Even employee representatives elected for the board of directors must sign the annual accounts. A board member cannot refuse to sign the annual accounts. If a board member has a diverging opinion on the contents, he/she must sign the annual accounts, anyway. If a note regarding the diverging opinion has been made in the minutes from the board meeting, the diverging opinion must be enclosed to the annual accounts.
• A clarification of the signatures (typed or in block letters) and date of signing must be stated together with the signatures.
• If a deputy member replaces a board member when signing, it must be stated together with his/her signature that the person in question has signed in the capacity of deputy member as well as clearly be stated whom he/she replaces.
• A board member cannot authorize somebody else to sign the annual accounts on his/her behalf.
• On the certified copy of the annual accounts a board member or the managing director must sign a ”certificate of adoption” (fastställelseintyg) assuring that the profit and loss statement and the balance sheet has been adopted at the general meeting of the association, including information of the date of the general meeting. The signature of the certificate must be in the original on the certified copy of the annual accounts which is filed with Bolagsverket. Please observe that the ”certificate of adoption” may at the same time include the adoption of the annual accounts (see appendix 2).
• The certificate of adoption must be typed or stamped in the annual accounts and cannot be filed on a separate paper.
• The certificate of adoption must also include information on the decision of the general meeting of the association about the profit or loss of the association (the total profit or loss of the association, i.e. not only the profit or loss for the current year, but also the balanced profit or loss).
• The date of the general meeting of the association cannot be earlier than the date of the auditor’s report.

To bear in mind regarding signatures for other forms of business enterprise

• A clarification of the signatures and date of signing must be stated together with the signatures.
• A partner cannot authorize somebody else to sign the annual accounts on his/her behalf.
• All the partners of a trading partnership must sign the annual accounts. If a limited liability company is a partner, the signatories of the limited liability company must sign the annual accounts.
• The general partner(s) of a limited partnership must sign the annual accounts.
• The managing director of a branch office of a foreign company must sign the annual accounts.
• A certificate of adoption is not applicable, but the documents must be certified.

Auditor’s report

Bear in mind

• The copy of the auditor’s report must be certified as the auditor’s report is a separate document.
• The auditor’s report must state the legislation according to which the annual accounts have been prepared, and the financial period must be stated by the first and last date of the period using the following standard, e.g. 2006-01-01 – 2006-12-31. Please observe that the date of the completion of the audit must be stated in the auditor’s report (i.e. it is not sufficient just to state the year and the month).
• If a deputy auditor replaces an ordinary auditor it must clearly be stated that the person in question is signing in his/her capacity as a deputy auditor, as well as the name of the auditor that he/she replaces.
• To add the auditor’s endorsement to the annual accounts! The endorsement of the auditor is very important as the annual accounts is one document, and the auditor’s report another separate document. In connection with an adverse opinion in the auditor’s report, it is even more important that a correct endorsement has been made.

Consolidated accounts

According to the Annual Accounts Act, Article 7, section 3 a parent enterprise need not prepare consolidated accounts, provided that it can be defined as a small–sized group of enterprises as stipulated in the Annual Accounts Act, Article 1, section 3. The exemption from the obligation of preparing consolidated accounts is not applicable if any of the enterprises of the group has its shares or debt instruments listed at a stock exchange in Sweden or in any other EEA member state.

The obligation to prepare consolidated accounts for securities companies, banks and insurance enterprises pursuant to the regulations stipulated in the Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL) and the Annual Accounts Act for Insurance Enterprises (ÅRFL) differs to a certain extent to the obligations for other enterprises preparing accounts pursuant to the Annual Accounts Act (ÅRL). Parent enterprises complying with the regulations of ÅRKL or ÅRFL cannot refer to another parent enterprise, complying with the regulations of ÅRL. Securities companies, banks and insurance enterprises cannot use the special exemption provisions of the Annual Accounts Act, Article 7, section 3.

Bear in mind

• The determination of the existence of a group relationship must be based upon the possession of shares and interests stated by the parent enterprise.
• If consolidated accounts are not prepared, but the enterprise refers to another parent enterprise (see ÅRL, Article 7, section 2), it must be checked that consolidated accounts for a higher level are enclosed, and that these accounts comprise the sub–group in question. Remember that each sub–group must file its own copy.
• If consolidated accounts are not prepared, but the enterprise states that the group is a small–sized group (see ÅRL, Article 7, section 3), this exemption should – according to Bolagsverket’s opinion – be mentioned in the additional information.
• Bolagsverket accepts the consolidated accounts of foreign companies in English, Danish and Norwegian, apart from in Swedish.
• The consolidated accounts must be complete. The following parts must be included:
  • The management report for the entire group
  • The consolidated profit and loss account
  • The consolidated balance sheet
  • The additional information of the entire group
  • A statement of sources and application of funds for the entire group.
• The auditor’s report for the entire group must also be filed.

Auditors

All enterprises obliged to conclude their bookkeeping with annual accounts pursuant to the Bookkeeping Act (BFL) must have an auditor (see appendix 1). An auditor must have the knowledge and experience of accounting and economic affairs with regard to the scope and nature of the company’s business to fulfil his task.

For partnerships with at least one legal entity as a partner the requirement is that the auditor be qualified, i.e. an approved or authorized public accountant.

Enterprises which pursuant to BFL, Article 6, section 1 and ÅRL, Article 1, section 3 are defined as so–called large enterprises must always have an authorized public accountant or an auditor with examination of professional competence as ”godkänd revisor”. For this type of enterprise Bolagsverket may decide that an approved public accountant be appointed instead (section 15, Auditors Act). Bolagsverket’s decision is valid for a maximum of five years. Even though an enterprise is not obliged to have a qualified auditor, the county administrative board may under certain circumstances decide that at least one accountant must be authorized or approved.

There are transitional provisions for the new simplified accounting principles. This may imply that an auditor appointed before 1 January 2007, and who according to the new stipulations can no longer alone be the auditor of an enterprise, may nevertheless remain registered as auditor during the transitional period. The transitional period for associations is valid until the end of the first annual general meeting of the association, held after the end of 2008. For other enterprises the transitional period runs until the end of 2008.

In the cases where the enterprise must have a qualified auditor pursuant to the above, the auditor must be reported for registration with Bolagsverket (this applies as of 1 January 2007).

For banking companies, credit market enterprises, mortgage institutions and securities companies special provisions apply.

Interim reports

The following enterprises are obliged to prepare an interim report and submit the interim report to Bolagsverket:

• companies with their shares or debt instruments listed on a stock exchange, an authorized marketplace or any other settled market
• financial holding companies, i.e. such companies which are exclusively or principally administering shares in subsidiaries which are either credit institutions and securities companies or insurance enterprises
• banks, credit market enterprises, mortgage institutions and securities companies.

An interim report is to be prepared at least once during a financial year covering more than ten months.

A certified copy of an interim report covering the business activities from the beginning of the financial year and comprising at least half and maximum two-thirds of the financial year must be submitted to Bolagsverket. As far as companies with the shares or debt instruments listed on a stock exchange, an authorized marketplace, or any other settled market are concerned the accounting period shall comprise the first six months of the financial year (so-called half-year report). The document must be signed by the complete board of directors and the managing director, if the shares or debt instruments of the company are listed on a stock exchange. For other companies the document must be signed by the managing director or a member of the board.

Within two months of the end of the report period the interim report must be sent to Bolagsverket. The interim report for the parent company in a group must, apart from the information for the parent company, cover equivalent information for the entire group. Reference information for the same report period for the previous financial year must be given unless particular obstacles exist.

As stipulated in Article 9, section 3 of the Annual Accounts Act (1995:1554) an interim report must consist of

• a summarized balance sheet
• a summarized profit and loss statement
• notes and
• an interim statement

The balance sheet and the profit and loss statement must contain at least those headings and sub-totals reported in the most recent annual report. The same principles for accounting and evaluation as used for preparing the annual report must be observed. Further law stipulations and directions apply to certain forms of business enterprise regarding interim reports, the contents of these, making them public, etc.

Nr 829 vne, 20 July, 2010