Keeping annual accounts is not only a legal obligation, it enables you to monitor the health of your business by keeping track of receipts and expenses.
International accounting standards
Under the EU's legislation, all listed EU companies must prepare their consolidated accounts in accordance with a single set of global standards - the International Financial Reporting Standards (IFRS).
These standards were developed by an independent accounting body, the International Accounting Standards Board (IASB) and then adopted by the EU.
Rules for non-EU businesses
To reduce the costs and complexity of trade for all parties, the EU is working towards global convergence of accounting rules. It does so by encouraging non-EU firms trading with the EU to produce their financial reports on the basis of the International Financial Reporting Standards or equivalent national accounting standards.
Simplified rules for small businesses
If you are a small, medium-sized, or micro company registered in the EU, your government can decide to exempt you from a number of reporting obligations, or allow you to report simplified accounts.
What is a micro-company?
This is a category under EU law, meaning any company which, on the date its balance sheet is due, meets at least 2 of the following criteria:
- balance sheet total below €350 000
- net turnover below €700 000
- fewer than 10 employees (on average) during the financial year in question.
If you exceed 2 of these 3 criteria for 2 consecutive years, the stricter rules will apply!
- No obligation to calculate year-end accruals and prepayments - except for costs of raw materials and consumables, staff, value adjustments and tax
- Reduced information in the notes to the accounts - any item explained at the foot of the balance sheet need not be explained in the annual report
- Simplified publication of your accounts - they can be sent to a single national authority, such as your tax authority, which publishes them on your behalf
- Simplified layout for the balance sheet and profit & loss statement
Even though these simplified rules are permitted by the EU law, not all EU countries apply them.
You do NOT qualify for the simplified rules if your securities (e.g. stocks, bonds and shares) are traded on a stock exchange, or if you are a bank or an insurance company!
Dig deeper, country by country: