Commercial organizations provide explanations to the annual report in text and tabular form to the tax authorities in order to give the most accurate and complete picture of the financial results and changes in the economic situation of the company for the year.
Who must submit an explanatory note
There is no need to submit textual explanations to budgetary and public organizations, if in the past year they did not receive income from commercial activities, to small enterprises and firms working on the simplified taxation system. All other commercial enterprises, including those who have branches or separate divisions, and those who are required to undergo an audit, must be provided with an explanatory note. Otherwise, they will not be able to obtain a normal auditor's report.
What an explanatory note looks like and what it reflects
1. Information about the company: full company name and short name, TIN and KPP, registration address, current account, name and address of the bank, organizational structure; SDCs (if any), principles and provisions of accounting policies; number of employees; the composition of the founders; information about the authorized capital; the name of the audit company that issued the annual report. Statistical codes are sometimes reported.
2. Types of activity and the amount of income received from each type of activity.
3. The movement of intangible assets and fixed assets, the amount of accumulated depreciation. It is reported whether a revaluation of fixed assets has been carried out, and whether any groups of fixed assets have been mothballed.
4. Financial investments. If the organization invested in the authorized capital of third-party enterprises or issued promissory notes, then the explanatory note reflects the movement on the financial investment accounts.
5. Analysis of inventories (these include raw materials, semi-finished products, construction materials, semi-finished products and components, fuel), goods for resale and state-owned enterprises, construction in progress and work in progress, depending on the types of activities of the organization.
6. The balance of funds on settlement and other types of accounts and in the cash desk of the enterprise. If an organization has frozen accounts with non-zero balance or a filing cabinet, they are mentioned separately.
7. The structure of long-term and short-term DZ and KZ. At the same time, overdue debts are identified and a list of debtor and creditor enterprises with the greatest debt is drawn up. This is necessary in order to determine the need to create reserves.
8. Short-term and long-term loans and credits. The analysis of the attracted funds is carried out and the average loan rate is calculated.
9. Reserves and authorized capital. If in the reporting financial year changes were made to the amount of the authorized capital, an explanation is drawn up.
10. Clarifications on the presence of property accounted for on off-balance sheet accounts, if the amounts of values are significant and have an impact on financial activities.
11. Information about dependent or affiliated persons and performed financial transactions. Transactions with shareholders and related parties are mentioned separately.
12. SPOD. If in the period between the end of the year and the time of signing the financial statements an event occurs that can lead to a change in the financial position of the organization, it is reflected in the accounting of the current year so that there is no distortion of the financial statements.
The director of the organization and the chief accountant sign the explanatory note.
