Financial accounts

The financial accounts (finansregnskap), also called the annual accounts (årsregnskap), are an accounting report that gives a complete overview of the company's financial events through the year. The report is mandatory for several forms of business entity, and must be prepared in accordance with the Norwegian Accounting Act (regnskapsloven) and Bookkeeping Act (bokføringsloven). The financial accounts are made available to the public, and give insight into the company's financial condition that matters to investors, creditors, customers and other stakeholders.

What must the financial accounts contain?

A complete set of financial accounts consists of several key components:

• Profit and loss account: Shows the company's revenue and costs through the year, and gives a picture of its financial performance.
• Balance sheet: Shows the company's assets, liabilities and equity at the start of the year (opening balance, IB) and at the end (closing balance, UB).
• Cash flow statement: Gives an overview of the company's receipts and payments, and shows how the cash has moved through the period.
• Notes to the accounts: Contain explanatory comments on the accounts, such as the number of shares held by each owner, details of payroll costs and specifications of assets and liabilities.

The difference between the financial accounts and management accounts

The financial accounts and the management accounts (driftsregnskap) have different purposes and follow different rules. The financial accounts are governed by the Norwegian Accounting Act and Bookkeeping Act, and must follow specific principles such as the prudence principle and the historical cost principle. This can mean that the financial accounts diverge from the actual situation in the business, particularly where assets are valued at historical cost rather than at current market value.

The management accounts, by contrast, are internal and are used for the business's own management purposes. They do not have to follow the same principles as the financial accounts, and can give a more precise picture of the real financial situation by using current values for assets and obligations. The management accounts are not to be distributed to external parties.

Who must file financial accounts?

Entities subject to the Norwegian accounting obligation, such as private limited companies (AS), public limited companies (ASA), Norwegian branches of foreign entities (NUF), foundations, housing co-operatives, housing associations, state enterprises, securities funds and shipping partnerships, must file financial accounts. Sole proprietorships and other forms of entity may also be obliged to file if they meet certain criteria, such as assets with a value above NOK 20 million or an average of more than 20 full-time equivalent employees.

The difference between the business tax return and the financial accounts

Although the business tax return (næringsoppgaven) and the financial accounts are based on the same figures, they have different purposes:

• The business tax return: Filed with the Norwegian Tax Administration (Skatteetaten) in order to determine how much tax the business is to pay.
• The financial accounts: Filed in order to satisfy the requirement that the accounting figures of entities subject to the accounting obligation are publicly available.

Read more about how Capassa gathers the financial accounts into clear reports.