If you have a company and you want to be transparent and transmit confidence to your investors, partners and employees, the annual accounts are a fundamental element. This information is necessary to comply with the law and to know the financial situation of the company. In this article we tell you what the abbreviated model, the SME model and the normal model are, so that you know which one to apply in your business and how to distinguish between them.
What are the annual accounts?
Index of contents
The first thing to be clear about is what the annual accounts are. They are a set of financial documents that all companies must present at the end of each financial year to report on their financial situation and economic results.
They include the following documents:
- The balance sheet.
- The profit and loss account.
- The statement of changes in equity.
- The cash flow statement.
- the notes to the financial statements.
All these documents form a single unit and must be drawn up in accordance with a series of models established in the General Accounting Plan, which are as follows: normal annual accounts, abridged annual accounts and SME annual accounts. These are described in detail below.
What models of annual accounts are there?
For companies, there are three options for annual accounts, each with its own specific characteristics and requirements. These are detailed below:
SME annual accounts model
This is a simplified model and in order to be able to use it, the company must meet a series of requirements, which are as follows:
- Total asset items not exceeding 2,800,000 euros.
- The net annual turnover must not exceed 5,700,000 euros.
- An average number of employees not exceeding 50.
This is the model usually used by micro-companies and if they choose this option they must maintain it for three consecutive financial years.
Abbreviated annual accounts form
This model is designed for companies that meet certain size and volume requirements and allows for a simpler presentation of the accounts.
In order to present the abridged balance sheet, annual report and statement of changes in equity, two of the following requirements must be met:
- The total of the asset items must not exceed four million euros.
- The annual net turnover must be less than eight million euros.
- The average number of employees during the financial year does not exceed 50.
In order to be able to present the profit and loss account in abridged form, two of these requirements must be met:
- That the asset item does not exceed 11,400,000 euros.
- That the net annual turnover does not exceed 22,850,000 euros.
- The average number of employees must be less than 250.
The abbreviated accounts model and the SME model are quite similar and businesses that meet the requirements of both models can choose whether to use one or the other.
Standard format of accounts
This is the most detailed format of annual accounts and is generally applied to larger companies or companies that do not meet the requirements we have seen above.
In this case, the accounts include all the organisation’s financial information in full detail.
Advantages of the abbreviated model and the SME model
The abbreviated model offers numerous advantages for companies that meet the requirements. We highlight the most relevant ones:
- Cost reduction. Less detail is required and some financial statements are excluded, thus reducing administrative costs associated with the preparation and presentation of the accounts.
- Efficiency in the presentation process. The process of complying with the legal obligation is more efficient and helps smaller companies to save time.
- Transparency vis-à-vis third parties. Although these are simplified models, they provide sufficient information for third parties (suppliers, customers, partners or investors) to assess the financial situation of the company. In this way there will also be easier access to finance with better conditions.
Choosing the right model for presenting annual accounts is a strategic decision that impacts the operational efficiency and financial transparency of any company.
It is essential to have the help of a business consultancy that has a thorough knowledge of the applicable regulations and verifies whether the company meets the requirements for using a simplified model.
For an SME, every euro counts, so it is very important to implement streamlined processes and optimize resources to control costs and increase profits, while providing real information to third parties and companies. This will allow the business to grow in the future and to do so on a solid basis.
