The annual financial report is among the most important documents for any business, no matter how small or large. In this article, we will share with you everything you need to know about the AFR.
What is an annual financial report?
AFR or annual financial report is a document that declares the activity of a company for the previous year. The annual financial report is mandatory for all operating businesses. It is prepared by a professional accountant, and in most cases, the person responsible for the report is the one responsible for the company’s accounting during the year.
The AFR document must comply with certain accounting law requirements. It consists of various elements, which most often include the company’s balance sheet, income statement, cash flow and equity.
In short, the annual financial report symbolizes the end of the accounting financial closing process. The annual accounting completion represents the financial indicators for the economic activity during the year, the final financial results and the financial status of the business.
What does the annual financial report include?
The annual financial report includes different components, each of which provides a different type of information.
The main elements of AFR content are:
- Accounting balance sheet;
- Income and expenditure statement;
- Cash flow statement;
- Statement of changes in equity;
Let’s look at each component in more detail.
Accounting balance sheet
The balance sheet is also known as the statement of financial position of the company. It presents in a summarized and organized way the possessions of the company in the form of assets, capital and liabilities relative to a specific moment and represented in monetary terms.
Income and expenditure statement
The income statement summarizes a business’s income and expenses over a specific period of time. The statement includes income from profits, financial, and extraordinary income. On the other hand, the expenses include those related to business activities, financial and extraordinary expenses.
At the end of this section, the final results for the period are calculated.
Cash Flow Statement
The cash flow statement component of the annual financial report includes cash flows from operating activities, investing activities, and financing activities. This section aims to present the ability of the firm to raise cash through receipts, as well as to present the ways in which they are spent.
Statement of changes in equity
The Statement of Changes in Equity section tracks changes in a firm’s equity according to the sources of change after specific operations, as well as the contributions of business owners during a specific period.
The appendix to the annual financial report, also known as “Notes”, aims to clarify the various elements of the report. This section presents information that is required for IFRS but is not presented in the rest of the financial statements, as well as information that is not included elsewhere but is important for understanding the individual components.
Now that you are familiar with the components of an AFR, let’s take a closer look at who can prepare the document and how and where the document is filed.
Who can prepare an AFR
A compiler of AFR can be an individual, as well as a professional accountant or an accounting firm, as long as they abide by accounting law standards and requirements.
The person considered as the one responsible for the preparation of the annual financial report must not have been convicted of crimes. In order to be qualified as a AFR preparer, one must meet the following requirements:
- To have a university diploma for accounting and economic education;
- To have gained experience in the field of accounting;
- To have another university economic education with 5 years of experience in the field of accounting;
- To have a secondary economic education with 8 years of experience in the field of accounting.
Who can submit an annual financial report
Now we have reached the most interesting part – submission of AFR to the registry agency. Here’s what you need to know about publishing AFR in the Commercial Register 2022.
The procedure is carried out within the 2022 deadline for submitting the AFR. Every business is obliged to prepare an annual financial report for the previous year by June 30, and some companies are obliged to complete the publishing of the AFR by September 30.
The persons who can carry out the procedure can be a trader, a lawyer with a written power of attorney for representation before the Registry Agency, as well as the compiler of a financial report with a notarized power of attorney. You can find information on the submission of an AFR by an official preparer and the specifics required in the sections above.
The individuals who meet these requirements have the right to be applicants when the AFR is announced. They can also entrust this activity to others with a notarized power of attorney.
For convenience, companies can take advantage of the option to submit the AFR to the commercial register electronically.
Fees for filing an annual financial report
One of the most common questions from this field is related to the AFR fee. Regarding the AFR 2021 fee, it is important to mention that it was BGN 40 for submitting the documents on-site, and BGN 20 for online submission. There is no fee for publishing the AFR in the Commercial Register in 2022.
Is AFR mandatory?
Filing of AFR 2022 is mandatory for various companies and types of enterprises. At present, submission and publication of AFR is mandatory for all registered traders, including:
- General partnership, limited partnership, and limited partnership with shares;
- Branch of a foreign merchant;
- Company under the Obligations and Contracts Act;
- Commercial Law Consortium;
- Commercial representation, etc.
Sole traders for whom independent financial audits are not a requirement are not obliged to publish financial statements.
Fines for failure to publish an AFR
Companies who fail to submit their AFR documentations on time are subject to sanctions. The NRA receives information from the Registry Agency about companies that have not published financial statements. As a consequence, the NRA carries out the necessary inspections and, upon detection of violations, fines the offenders with certain sanctions.
The standard fine for failing to submit the AFR on time is between BGN 200 and BGN 300 for the manager of the company, in addition to a penalty in the amount of 0.1 to 0.5 percent of the net sales revenue for the company, with the total value of the fine being a minimum of BGN 200.
Preparing and submitting an annual financial report is a responsible task. It’s strongly recommended to rely on a proven and experienced specialist who will help you get through the process with zero stress, guaranteed results, and no fines. The MKAFinance professionals are fully aware of the requirements, regulations and deadlines for filing an AFR, which guarantees a high-quality, comprehensive service.