Requirement to maintain accounting
All companies and branches of foreign companies operating in Estonia are subject to accounting requirements. The general principles of accounting are set out in the Estonian Accounting Act that provides legal bases and establishes requirements for organizing accounting and financial reporting pursuant to internationally recognized principles. The management board shall organize the accounting of the companies.
Financial reporting obligations
At the end of each financial year, an accounting entity is required to prepare an annual report consisting of the financial statements (balance sheet, income statement, cash flow statement and statement of changes in owner’s equity and notes on the accounts), the management report, the auditor’s report (if an audit is required) and the profit distribution proposal or proposal on covering of loss for the financial year.
Commercial Register
Every company must prepare and submit an annual report to the Commercial Register.
Annual reports must be filed with the register even if the company had no transactions in the financial year. A penalty can be charged if an annual report is filed late.
Deadline for filing
The approved annual report must be submitted to the Commercial Register within six months of the end of the financial year.
Reporting format
Unconsolidated annual reports prepared under Estonian GAAP are to be submitted electronically in XBRL format through Company Registration Portal.
Other annual reports are to be submitted in pdf format. Since 2011, consolidated annual reports prepared under Estonian GAAP and annual reports prepared under IFRS can voluntarily be submitted in XBRL format.
The environment for submission of annual reports of the company registration portal of the Commercial Register enables persons to prepare reports according to forms provided by offering summarizing and controlling rules, to assign persons who can make entries, allows an auditor to create an electronic auditor’s report, and all authorized persons to sign a digital report.
Entries in the Commercial Register are public.
Reporting currency
The Annual financial statements shall be prepared using the currency officially applicable in Estonia.
Language of the annual report
Annual financial statements should be prepared in the Estonian language. However, the Accounting Act does not specifically limit the language in which everyday bookkeeping should be arranged.
Exceptions for branches of foreign companies
Branches of foreign companies need not prepare annual reports. Instead, an unattested copy of the audited and approved annual report of the company is submitted to the Commercial Register of the location of the branch no later than one month after approval of the annual report or seven months after the end of the financial year.
Financial year
A company’s financial year is 12 months long.
Financial years varying from the calendar year
A financial year generally coincides with the calendar year (1 January-31 December), but a company’s articles of association may specify a different financial year.
Accounting principles
According to the Act, commercial undertakings may choose whether to prepare their annual financial statements according to Estonian Accounting Standards (Estonian GAAP) or IFRS. Listed companies, credit institutions and insurance companies are required to follow IFRS.
The Estonian Accounting Standards are issued by the Accounting Standards Board which acts under the supervision of the Ministry of Finance.
Estonian GAAP
Estonian GAAP effective from 2013 is based on IFRS for Small and Medium- sized Entities (IFRS for SMEs) with limited differences from IFRS for SMEs with regard to accounting policies as well as disclosure requirements.
Differences in accounting policies
Differences in accounting policies arise mainly due to the fact that in some areas Estonian GAAP allows a choice of accounting policy, one of the alternatives being the only policy accepted under IFRS for SMEs. In areas not specifically covered by Estonian GAAP, the treatment in IFRS for SMEs is recommended, but not mandatory. Each Estonian GAAP standard contains a brief comparison with the respective section of IFRS for SMEs. Translation of the guidelines is available here.
Read also: Doing Business in Estonia
