Definition of Annual Financial Statements
Annual financial statements are financial reports based on a time period that spans 12 consecutive months. The most common time period used when producing annual financial statements is that of the calendar year. However, should a company’s fiscal year not overlap with the financial year, the annual financial statements may also be based on the company’s fiscal year.
Public companies are required to issue statements at certain periods throughout the year as well as reports covering the complete year’s financial activity. These full-year reports are the company’s annual financial statements. The information which is frequently included as part of a company’s annual financial statements include the balance sheet, statement of retained earnings, income statement, and statement of cash flows. Investors and creditors make corporate decisions after processing and analyzing the information which is contained in these reports. Notes from higher management may also be used to supplement annual financial statements.
Necessary Information to Be Contained in an Indonesian Company’s Annual Financial Statements
Some of these most important information contained within the annual financial statement of an Indonesian company exists within its balance sheet. The balance sheet contains all information the company’s assets, liabilities, and equity as of the end of the time period specified within the annual financial statement. The balance sheet serves as a snapshot of the financial position of the company at a particular point in time.
The income statement provides information about the income and expenses of the company during a stated period of time. It is often deemed to provide a more reliable overview of the company’s financial well-being than does the balance sheet.
The cash flows statement reports how the company generated and used all cash acquired during the period specified. This statement classifies all uses of cash into three distinct categories: operations, investing, and financing.
An Indonesian company’s annual financial statement also ought to include all transactions that affected the equity of the company during the period in question. Examples of the transactions which are usually included are dividends, owner’s investments, and mergers. All transactions typically include explanatory notes alongside them.
All of this information is to be used by the management of the company. The management will then analyze and discuss the annual financial statement. However, final decisions made by the management are usually not made until some time after the first viewing of the annual financial statement itself.
Annual financial statements contain large amounts of information related to the financial well-being of a company. Certainly, if you own a company, you would want it to be in peak financial condition. This is where we at Paul Hype Page & Co come in. We will help you ensure that your company remains in good financial condition at all times. We do this through the provision of our financial planning services which have aided many a company owner, including those in Indonesia as well as those in other countries.
Why Indonesian Companies Must File Annual Financial Statements
The primary aim of an annual financial statement is to inform shareholders and the public of the financial well-being of the company. Annual financial statements must be made available to any authorities who request access to such statements. Such authorities may sometimes include some of Indonesia’s official government bodies. Other interested parties such as shareholders or potential investors may also be interested in a company’s financial statements because they would be able to use the information contained within them to assess the level of security of their investments in the company.
Indonesian companies must also file annual financial statements for the purposes of legal compliance. This is because the government has imposed filing requirements upon all companies in Indonesia. These filing requirements are to be followed for as long as the company is in existence; all companies are to adhere to them until the dissolution of the company. However, certain business owners may face difficulties in managing filing requirements, especially those who are in charge of the Indonesian branch of a foreign company. Such owners often consult tax professionals to ensure legal compliance with all important filing deadlines.
Annual financial statements are also important for the purposes of internal communication. An accurate annual financial statement not only displays a company’s financial situation; it also ensures that there will be accountability. The management is obliged to provide evidence of how and why capital has been used. Through this information, the management of the company will be able to assess the level of the success or failure brought about by their managerial policies. However, it should be noted that the results are not the only factor used to determine managerial success; however, an in-depth analysis of the exact figures contained within the annual financial statement will reveal significant information which is important to all involved with the company.
Legal Matters Related to Annual Financial Statements in Indonesia
Failure to comply with the Indonesian accounting and compliance requirements will cause monthly interest penalties to be imposed on any late payments made. The lowest of these penalties is just 2%, while the highest is 48%. Those who have exceeded the deadline will experienced tax penalties imposed by Indonesia’s tax officials accordingly. Companies which have been known to have violated these requirements will also receive increased scrutiny from tax officials in the future.
Indonesia’s tax laws have undergone many changes. However, a lack of awareness of these regulations does not excuse one from having to adhere to them. Failure to accurately report taxes correctly is a common mistake made by foreign and local investors alike in Indonesia.
We at Paul Hype Page & Co do not want you to violate any of Indonesia’s tax regulations. Therefore, our knowledgeable and skilled tax experts will assist you with any of your tax queries and needs. We will see to it that you and your company are fully compliant with all tax regulations that exist in the country.
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