Every year the companies must publish annual financial statements for the past year, as the deadline for sole proprietors (which are subject to statutory audit) is 31st May, for limited liability companies (LLC) – by 30th June, and for all other entities– by 31st July.
During the annual fiscal closing and together with submission of the annual tax return, the companies also submit an annual report for their business activities during the past financial year. In fact, the annual report for the business activities presents a standardized state template of the annual financial statements and various disclosures. A few years ago the annual activity report used to be submitted to the National Statistical Institute (NSI), while the annual financial statements were submitted to the National Revenue Agency (NRA). Eventually both institutions synchronized their databases, which facilitated the companies by allowing them to submit a standardized financial reporting package at one spot.
So the direction is the right one, but the companies are still required to publish their annual financial statements in the Commercial Register. It is quite sensible if the legal framework is adjusted, proper technical settings are implemented and the annual activity report is submitted automatically in the Commercial Register. This is actually the same information, also in a standardized template, which can be used for publication.
What would be the benefits?
- Companies will be additionally facilitated via reducing their duplicative administrative engagements.
- A standardized publishing form will be used. Currently the Commercial Register contains many annual financial statements, which in fact include only a a few elements of the annual financial statements and, actually, cannot be even considered alone as “annual financial statements”. Many companies often publish the minimum information only to respond to the formal requirement. As no one controls the quality of the published information, the Commercial Register contains a lot of cases with scare or incomplete information.
- I have also experienced cases in my practice, where some companies refuse to publish their annual financial statements, regardless the fact that penalties can be levied, as they would not like this information to be revealed before the competition (which, in fact, raises a completely different question: why a private non-public company must reveal financial data before the general public, so that anyone can analyze it?). Submission of the annual activity statement at one spot will most probably limit such cases significantly, since NRA (tax office) will be involved, and the annual tax return submission will be linked to the activity report submission. Thus, the companies which do not want to publish their annual financial statements will also not be able to submit their annual tax return, which immediately will create a tax problem for them.