The annual report summarises financial results, evaluates the achievement of objectives, and provides a comprehensive overview of the organisation's activities over the past year. However, its high-quality preparation requires thorough preparation, knowledge of legislative requirements, and the ability to present relevant information clearly and effectively. In this article, we will examine the key aspects of preparing an annual report in accordance with Slovak regulations, as well as the most common mistakes to avoid.
The obligation to prepare an annual report is regulated by the Slovak Act No. 431/2002 Coll. on Accounting (§ 20). Companies that are required to have their financial statements audited are obliged to prepare an annual report. This mainly concerns larger business companies that meet the conditions specified in Section 19 of the Accounting Act.
According to Section 20 of Act No. 431/2002 Coll. on Accounting, the annual report must contain, in particular, the following information:
1. Information about the accounting entity
Basic identification data, such as name, registered office, legal form, object of activity, and other essential information.
2. An overview of the development of the accounting entity's activities and its economic situation
An assessment of the results achieved, the development of revenues, costs, the financial result, and other key economic indicators.
3. Information on the expected development of the accounting entity
A brief outlook and planned goals, strategies, and investments for the future.
4. Activities in the area of research and development
If the accounting entity has carried them out.
5. Information on the acquisition of own shares or business interests
If they were acquired during the accounting period, details shall be provided.
7. Use of the profit or loss after taxation
Proposal for the distribution of profit or settlement of loss.
8. Events that occurred after the date to which the financial statements are prepared and which are significant
For example, changes in the ownership structure, significant contracts, or events affecting the financial situation.
In practice, certain mistakes are often repeated when preparing annual reports, which can lead to their incompleteness, inaccuracy, or a breach of legal obligations. The most common ones include:
1. Incomplete or inaccurate information
- The annual report often does not contain all the elements required by law under Section 20 of the Accounting Act (e.g., missing data on the development of activities, information on significant post-balance sheet events, or on the use of the financial result);
- The signature of the statutory body is missing, or the date of preparation is missing;
- The name of the person responsible for preparing the report is not stated;
- Data is sometimes copied from the previous year without being updated, which reduces its informative value.
2. Formal preparation without real content
The report is prepared only "pro forma," without a real assessment of business activity or a future outlook; An analytical evaluation of the results is missing; the report is merely a summary of data from the financial statements without commentary.
3. Lack of clarity and comprehensibility
Overly technical or accounting terms are used without explanation; The text is difficult to read, lacks a logical structure, division into chapters, headings, or introductory and concluding summaries.
4. Outdated or incorrect data
- Outdated data is provided (e.g., old company registered office, incorrect business name, unchanged composition of statutory bodies);
- The data is not consistent with the financial statements - for example, the financial results or the number of employees do not match.
5. Incorrect or missing inclusion of mandatory annexes to the annual report
Mandatory annexes required by law, such as the auditor's report and the financial statements, are not included.
7. Failure to meet the statutory deadline
Annual reports are not filed in the register of financial statements within the prescribed period or are not filed in the register at all.
ESG as a mandatory part of annual reports
Based on an amendment to the Slovak Accounting Act, information from the area of ESG (Environmental, Social, Governance) will also be included in the content of annual reports from 1 June 2024. The aim of this amendment is to increase business transparency and provide investors, business partners, and the public with a comprehensive picture of how companies approach environmental protection, social responsibility, and governance.
However, not all companies are required to include ESG information in their annual report. Below is a brief overview of the entities that are required to disclose this information, as well as those to whom this obligation does not apply.
The obligation to report ESG information applies to
- Large accounting entities that exceed the criteria set by law (total assets, net turnover, number of employees)
- Public interest entities (e.g., banks, insurance companies, listed companies)
- From 2025, also selected medium-sized enterprises according to the CSRD (Corporate Sustainability Reporting Directive)
The obligation to report ESG information does not apply to
- Micro and small accounting entities
- Companies that are not public interest entities and do not meet the criteria for a large accounting entity
- Subsidiary companies, if they are included in the consolidated sustainability report of the parent company.
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