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    Country by Country Financial Reporting and Auditing Framework

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    Finland – Crowe Horwath Finland, HelBal Oy (prepared January 2015)

    Preparation of and Filing of Statutory Financial Statements

     

    Companies are required to prepare annual financial statements within 4 months after the balance sheet date. The tax declaration is also filed within 4 months after the balance sheet date. Annual financial statements are attached to the tax declaration. Annual financial statements are automatically sent from the tax office electronically to the company register Patentti- ja rekisterihallitus (www.prh.fi).

    Ordinary General Meeting of shareholders has to adopt the annual financial statements within 6 months of the end of financial year.

    Financial Reporting Framework

     

    In Finland the financial statements are regulated by the Accounting act and Ordinance, the Companies act, the Act relating to general and limited partnerships as well as statements of the Ministry of Trade and Industry and instructions issued by the Finnish Accounting Board (a state body operating in Ministry of Trade and Industry).

     

    The Accounting act and Ordinance defines the minimum requirements for bookkeeping and financial statements, giving some exceptions for small companies. The accounting act applies to all forms of business organizations, as anyone who carries on a business or practices a profession must keep an accounting record of these activities. The companies act divides limited liability companies into public and private liability companies. There are special requirements of the Helsinki Stock Exchange and the Ministry of Trade and Industry regarding public companies.

    Structure of the Financial Statements

     

    A complete set of financial statements include the following components:

    • Board of Directors´ report  (required for limited liability companies and partnerships);
    • Profit and loss statement;
    • Balance sheet;
    • Cash flow statement (not mandatory for small companies and partnerships); and
    • Notes to the annual accounts.

    The Accounting Ordinance defines the presentation standards for statutory financial statements.

    Exceptions for small companies in accounting

     

    According to the Accounting Act, a company is considered a small company if, in two consecutive financial years, it does not exceed two of the three flowing criteria:

     

    • Net turnover of 7,3 MEUR
    • Total assets of 3,65 MEUR
    • Average number of employees  50

     

    Small companies may present an abbreviated profit and loss statement and abbreviated balance sheet. In addition, some of note disclosure requirements are not required from small companies.


     

    Consolidated Accounts

    The parent company and its subsidiaries, in which the parent company has a dominant influence, constitute a group. A group must publish consolidated annual accounts if the group fulfils in two consecutive financial years, at least two of the three conditions:

     

    • Net turnover of 7,3 MEUR
    • Total assets of 3,65 MEUR
    • Average number of employees  50

     

    In addition, a Finnish parent company is also exempted from the obligation to prepare consolidated accounts if it is at least 90% owned by an entity governed by the law of European Economic Area member state and the annual accounts of the Finnish parent company together with its subsidiaries are consolidated into the accounts of that entity. If the Finnish parent company has minority owners, their unanimous approval for not preparing consolidated accounts must be received.

     

    Regardless of the above constraints, the consolidated accounts must be prepared when the parent company of the group intends to pay a dividend, refund or pay interest on a subordinated loan or grant a monetary loan to a related party of the company or is buying back its own shares.

     

    Retention of Accounting Material

     

    Year-end financial statements, details of the balance sheet items, accounting ledgers and the chart of the accounts must be retained for at least ten years after the end of the financial year.  Vouchers for the financial year, correspondence related to transactions and reconciliation documents for a computerized accounting system as well as accounting material must be retained for at least six years after the end of the financial year.

     

    Audit Regulation

     

    The Audit act regulates the audit principles, the obligation to have an authorized auditor and the authorization requirements. The Central Chamber of Commerce supervises the auditing profession.  The Authorized Public Accountants are authorized by the Central Chamber of Commerce.

    An authorized public auditor must be appointed by companies which exceed two of three following criteria in both the past completed financial year and the financial year immediately preceding it:

    • Balance sheet total exceeds 100 000 EUR
    • Net sales or comparable revenue exceeds 200 000 EUR
    • Average number of employees exceeds three

    Auditing Standards

     

    Auditors have to follow auditing standards in Finland which are largely consistent with ISA standards.

     

    Ethical Framework

     

    Auditors are bound by the Code of Ethics defined by Institute of Finnish Auditors.

    Auditor´s Report

     

    The auditor´s report covers the accounting, the complete set of financial statements and the corporate governance of the company.

     

    Audit Quality

     

    The authorized auditors are subject to periodic external quality reviews carried out by representatives of The Central Chamber of Commerce. In practice the quality reviews are done at least every 5 years. Auditors that also perform audit for public interest entities, are reviewed at least every three years.

     

    Institute of Finnish Auditors supports auditors in developing their practices and in meeting the quality standards set by The Central Chamber of Commerce by organizing trainings, publishing books and meeting with different interest groups relating to audit profession in Finland and abroad.


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