Help Ensure That Your Annual Financial Statements Compilation Goes Smoothly

All companies are required to have Annual Financial Statements compiled to reflect the financial position and performance of the company for the past year.  This can be a stressful time for directors and staff, especially if the financial statements are subject to an audit.

 

With a little bit of preparation, this process can be relatively painless.  Whether the financial statements are being compiled internally by company staff, or independently by an accounting professional, here are a few things you can do before starting this process:

Reconcile all your control accounts

All of your bank accounts, petty cash, accounts receivable, accounts payable and inventory should have reconciliations done at the end of the financial year.  This is by far the most important thing that you can prepare for your financial statement compilation. Most of the unexpected additional time spent in compilation engagements relate to adjustments that are discovered during the fieldwork due to reconciliations not being done.  It is important to ensure that you have supporting documentation for any material reconciling items.

Compile a file of all new agreements

The compiler will need to know about all new and amended agreements and contracts the company entered into during the year, as these may need to be disclosed in the notes of the financial statements.  These may include operating agreements, lease agreements, debt agreements, etc.  Gather all of these in one place to save the time it would take to search for all of these.  These agreements will be reviewed by the compiler during the course of the fieldwork to identify which agreements need to be mentioned in the notes to the financial statements.

Update your assets register

Even if your accountant calculates your depreciation, you should still draw up a list of assets you’ve purchased and sold over the course of the year.  This will significantly speed up the process of reporting on the assets in the financial statements.  Make sure that your assets summary includes dates, amounts and reasonably detailed descriptions of all assets purchased and sold during the year.

Make a list of related party transactions

Make a detailed schedule of all related party transactions that took place during the year including sales, purchases, rent, loan, etc. These transactions need to be disclosed separately in the financial statements.  Identifying these can be time-consuming for someone not exposed to the company’s transactions on a regular basis so a lot of time can be saved by just having a schedule ready for the accountant’s review.

Communicate changes to the compiler

Identify and communicate to the compiler all changes in business operations as well as any changes to the way the accounting information was processed from the previous financial year (if applicable).  This will eliminate any confusion when looking through the accounting records during the compilation.  This is especially relevant if you are using the same accountant who compiled the previous year.

Have all the usual information ready

All compilers will generally ask for similar information every year.  Be proactive and have this information ready ahead of time.  Below is a list of the most common information requested for a compilation:

• trial balance as at year end;
• general ledger detail covering the entire financial year;
• bank statements and reconciliations for the full financial year;
• fixed asset register and all documentation relating to new additions to assets for the financial year;
• supporting documents for any investments reflecting the value at the end of the financial year;
• amortization schedules for all long term debt (e.g. vehicle purchase agreements). These can be requested well ahead of time from the relevant financial institution;
• the full payroll detail report for the financial year;
• the memorandum of incorporation (MOI) and other company secretarial documents;
• all share certificates;
• debtors and creditors ageing report and reconciliations;
• closing inventory report and reconciliation;
• minutes of meetings of the board of directors and any other oversight committees; and
• Value Added Tax submissions made to the revenue service as well as the supporting tax schedules upon which the submissions were based.

 

 

To learn more about preparing for your financial statement, contact someone from the Exceed group www.exceed.co.za/contact-exceed/
Article written by : Trygve Fenton – Professional Accountant (SA)
Director of Exceed Professional Accountants (Johannesburg)
Contact him directly: trygve@exceed.co.za