Checklist for preparing the annual report

As the year draws to a close, the reporting season begins. To ensure that your annual report is completed smoothly and on time, we have compiled the key steps and recommendations — what to prepare, when to act and which information your accountant will need.

Deadline and process for submitting the report

A financial year typically lasts 12 months (Accounting Act § 13), and companies have six months to submit the annual report. For example, if the financial year ends on 31 December 2025, the deadline for submitting the annual report is 30 June 2026.

Do not leave the preparation of the annual report to the last minute — the best time to start planning is now. Together with your accountant, set a realistic schedule so that all necessary actions, inventories and controls are completed on time. This ensures a calm reporting process and timely submission.

The preparation of an annual report usually includes the following steps:

• preparation of the financial statements, including reconciliation of balances, inventories, review of management assessments, etc.;
• preparation of the management report (where required);
• approval of the report by management;
• audit (if required by law or considered necessary by management);
• preparation of the proposal for profit distribution or loss coverage;
• submission of the report to the e-Business Register.

Requirements for the annual report

The requirements for the annual report depend on the size and category of the company. The Accounting Act classifies all accounting entities, regardless of legal form, into four groups: micro, small, medium-sized and large entities. Consolidation groups are similarly divided into small, medium and large. Based on these categories and the Estonian Financial Reporting Standards (see more in Accounting Standards Board Guideline 15), different requirements apply to the content of the annual report and the disclosures — the larger the entity, the more detailed the information that must be presented.

It is important to know that a company is reclassified into a new size category, and its reporting requirements change, only if it does not meet the criteria of its current category at two consecutive reporting dates (Accounting Act § 2 (6)). This ensures that reporting obligations change only when shifts are permanent, not temporary.

Company category and structure of the report

In accordance with § 3 of the Accounting Act, the structure of the annual report depends on the size of the undertaking.

* The four primary statements are: balance sheet, income statement, cash flow statement and statement of changes in equity.
** Sustainability reporting requirements are being phased in from 2024–2028, starting with large undertakings and public-interest entities and gradually extending to smaller financial and public-interest entities. See more in § 24 (2–6) and § 62 (18–21) of the Accounting Act.
*** A smaller entity may always choose to apply the requirements of a higher category.

Information the accountant needs for preparing the annual report

The preparation of the annual report requires a thorough review of all balances of assets and liabilities and confirmation of their accuracy and fair value. This includes inventories and various management assessments to ensure that accounting data reflects the entity’s true financial position.

Cash and bank accounts

At the balance sheet date, both cash and bank balances must be inventoried, including the revaluation of foreign currency amounts where necessary. If an audit is required, bank confirmation letters should be requested early. Cash on hand must be counted and documented.

Time deposits also need to be reviewed — deposits maturing within three months after the balance sheet date are classified as cash equivalents; longer-term deposits are recognised as financial investments.

Trade receivables

At year-end, it is advisable to send balance confirmations to customers to verify receivables and identify discrepancies. Based on ageing analysis, management must assess recoverability and the need for impairment. For doubtful receivables, management must issue a justified written decision.

Inventories

Inventories must be counted on or near the balance sheet date, and the results documented. Obsolete or unusable inventories must be written off, and impairment recognised where the carrying amount exceeds net realisable value.

Items such as “goods in transit” and prepayments must be reviewed separately, considering delivery terms and supporting documentation.

Property, plant and equipment and intangible assets

All fixed assets must be inventoried, their condition assessed and depreciation rates evaluated for adequacy. Management must perform impairment testing where indicators of decline in value exist.

Financial investments

All transactions related to financial investments (e.g. deposits, shares, bonds, cryptoassets, gold) must be documented. Statements, reports and management assessments on valuation changes must be provided.

Investments in subsidiaries and associates

Review the list of subsidiaries and associates and provide their annual reports. For investments measured at cost, management must evaluate whether the carrying amount reflects current value and recognise impairment where necessary.

Investment property

Investment property must be assessed at fair value or cost, depending on the accounting policy. Fair value must be supported by valuation reports and disclosed assumptions.

Loans issued and received

Loan agreements must be valid and provided to the accountant. Interest must be accrued correctly, and balances confirmed with counterparties. Classification into short- and long-term portions must follow repayment schedules.

Leases

All lease agreements must be reviewed to ensure correct classification as finance or operating leases under EAS 9 “Lease Accounting”.

Liabilities and provisions

All liabilities — trade payables, advances received, tax liabilities, payroll liabilities and vacation reserves — must be accurately recognised. Provisions must be created for obligations with uncertain timing or amount, such as warranties, severance benefits, performance bonuses and legal disputes.

Foreign currency transactions and balances

Foreign currency transactions must be translated using the exchange rate at the transaction date. Monetary assets and liabilities are revalued at the balance sheet rate.

Government and project funding

All grants and project-based funding must be supported by documents and assessment of whether related conditions have been met.

Equity

Management must ensure compliance with capital requirements and explain in the management report how insufficient equity will be restored if needed. All equity movements must be reviewed and documented.

Revenue and expense accruals

Revenues and expenses must be recognised in the period to which they relate, following the matching principle. Delivery terms often determine when revenue is recognised.

Contingent assets and liabilities

All potential assets and liabilities that require disclosure must be communicated to the accountant (e.g. legal disputes, guarantees, contractual obligations).

Related-party transactions

A list of related parties and a summary of transactions and balances (loans, sales, purchases, compensation, etc.) must be provided for disclosure purposes.

Events after the balance sheet date

All significant subsequent events that may affect the financial statements or require disclosure must be reported.

Management report

The management report forms an integral part of the annual report, providing a comprehensive overview of the company’s activities, financial results and key developments. Preparing the management report is the responsibility of management, not the accountant.

The management report must include at least:

• main areas of activity and product and service groups;
• management and organisational structure, including foreign branches;
• major investments made during the year and planned for the near future;
• R&D projects and related expenses;
• significant events during the reporting period and after the balance sheet date that may affect future results.

If the report is audited, it must also describe:

• the impact of general economic trends, seasonality and market cycles;
• significant environmental and social impacts;
• financial risks and risk-management principles;
• key financial ratios and their calculation methods.

Large companies and public-interest entities must additionally disclose:

• intangible resources (e.g. knowledge, technology, trademarks) and their role in value creation;
• diversity policies in management and their outcomes.

Entities required to prepare a sustainability report must present their environmental, social and governance impacts in accordance with European Sustainability Reporting Standards (ESRS).

The complete list of minimum information required in the management report is provided in § 24 of the Accounting Act.