Annual report

The annual report is obligatory for all undertakings operating in Estonia and it must conform to the form established in legislation. The annual report consists of the annual accounts and the management report.

Financial year

A company’s financial year is 12 months long. 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. In the selection of the most suitable financial year, it should be considered that the selected 12 consecutive months are chosen so that the period would be in keeping with the operating cycle of the accounting entity. One should not also forget that a financial year must always start on the first date of a month and end on the last date of a month (e.g. start on January 1 and end on December 31).

When a company is established, dissolved, or the beginning date of the financial year changed, the financial year may in these exceptional cases be shorter or longer than 12 months, but not longer than 18 months.

Stages of preparing an annual report:

  1. Preparing the annual accounts
  2. Preparing the management report

The submission of an annual report entails the following steps:

  1. Auditing
  2. In the case of a company, preparation of the profit distribution proposal or proposal on covering of loss for the financial year
  3. Submission of the annual report for approval

Annual accounts

According to amendments to the Accounting Act, which became effective on 1 January 2016, companies are divided into different categories based on the figures of the balance-sheet date of the accounts and the level of public interest. Pursuant to these categories, different requirements for annual reports have been established on the basis of the Estonian financial reporting standards.

In the case that a company fails to meet the criteria established for its category in two consecutive financial years, the specific provisions of the category to which it now belongs are applied to the company starting from the third year (the year that follows the two consecutive financial years).

Annual accounts must give a true and fair view of the accounting entity’s financial position, results of its operations, and cash flows to the user of these accounts, which the user of the accounts could use when adopting business decisions. Annual accounts consist of basic reports (balance sheet, income statement, cash flow report and statement of changes in equity) and notes.

According to the Accounting Act, micro-enterprises and small-scale enterprises may, based on the Estonian financial reporting standard, prepare on financial years that started on 1 January 2016 or later an abridged annual accounts instead of full annual accounts including at least two basic reports (balance sheet, income statement) and annexes. A micro-enterprise may also prepare an abridged or full annual report of a small-scale enterprise if it so wishes.

The financial statements must give a true and fair view of the company’s financial position and the results of its operations and cash flows. The annual report consists of basic reports (balance sheet, income statement, cash flow report and statement of changes in equity) and notes. The annual accounts must be prepared in Estonian and the denomination used must be euro.


Abridged annual reports of micro-enterprises are made up of at least two basic reports: abridged balance sheet and income statement, and up to three annexes. A micro-enterprise that uses the option of drawing up an abridged annual report provided for it need not prepare a management report.

Abridged annual reports of small-scale enterprises are prepared according to the Estonian financial reporting standard and include two basic reports: detailed balance sheet and income statement and up to nine annexes. Small-scale enterprises also need to prepare a management report.

Medium-sized enterprises and large enterprises prepare their annual reports either according to the Estonian financial reporting standard or the requirements of IFRS, and the reports include a management report, four basic reports, and 15 annexes on average.

Full annual report – balance sheet, income statement, cash flow report, statement of changes in equity, and annexes – is mandatory for medium-sized and large enterprises, and non-profit associations and foundations.

Annual accounts shall be prepared in Estonian and in the currency officially applicable in Estonia, and the degree of precision used for the figures shall be indicated (for example, in euros, thousands of euros).

1. Balance sheet and income statement

The balance sheet is a view of the company’s financial situation (assets, liabilities and equity as of the end of the financial year). The income statement lists the income and expenses and is a view of the company’s operating results during the reporting period (income, expenses and profit or loss).

2. Cash flow statement

The cash flow statement is a view of the company’s cash flows during the reporting period (receipts of cash and cash equivalents and disbursements). In this statement, you indicate the receipts and expenditures during the reporting period, grouped according to their purpose as cash flow from operating activities, investing activities and financing activities.

3. Statement of changes in equity

The Statement of changes in equity is used to recognize changes in the company’s equity during the reporting period. You are required to record separately any contributions of capital made by the owners and disbursements made to owners, profit or loss for the reporting period, impact of changes in accounting policies, increase and decrease of reserves and other economic transactions that impacted equity entries.

4. Notes to the annual accounts

The number of notes in the annual report depends on the particular company, but the following must certainly be added to the report:

  • explanation as to the accounting practice used for preparing the annual report;
  • the accounting polices used for preparing the annual report;
  • explanations regarding to key entries and changes in them during the reporting period.

Management report

Management reports provide an overview of a company’s activity and circumstances that are of material importance to evaluating the company’s financial condition and economic activity, key events in the financial year, and forecast development trends in the next financial year. One should certainly not forget to put down the main activity and ancillary activities of the accounting entity.

In the case that the owners’ equity is not in accordance with the requirements of the Commercial Code (meaning that it is negative) as at the end of a financial year, the management report must include a description of activities that have been performed or will be performed to be sustainable in the future or state if a different decision has been adopted.

Accounting entities that are subject to an audit obligation must include the main financial ratios concerning the financial year and the preceding financial year, and the methods for calculating the ratios (equations) in their management report.

Review of annual report by auditors

A sworn auditor’s report must be appended to the annual report if a company is required to undergo an audit pursuant to the Auditors Activities Act. An audit or review of the annual report is mandatory for accounting entities that have at least two figures in their annual report exceeding the following conditions:

  • annual net sales of 4 000 000 euros and more;
  • balance sheet volume of2 000 000 euros and more;
  • average number of employees is at least 50.

The auditor review is also obligatory for organisations subject to accounting requirements who meet at least one of the following three conditions as of the balance sheet date:

  • annual net sales of 12 000 000 euros and more;
  • balance sheet volume more than 6 000 000 euros,
  • average number of employees is at least 180.

The auditor review is also obligatory for all public limited companies, organisations subject to state accounting requirements, local municipalities, public organisations, foundations and political parties funded from the state budget.

Filing the annual report

You are required to file the annual report with the Commercial Register within six months of the end of the financial year. The report can be filed electronically via the e-Commercial Register Company Registration Portal.

When filing your annual report, all of your permissions and notices that have been entered in registries are displayed, and you must confirm that you have met the notification obligations established in law or that the aforementioned notification obligations do not exist. Before you confirm your data, check your data in the Register of Economic Activities and make sure the data is correct. If there are inaccuracies in the registry data, submit a notice to have the data amended.

Guidelines for filing the annual report electronically.

Last amended: 21-09-2016 10:41