COMPILATION OF ANNUAL FINANCIAL STATEMENTS

Specialist AFS accounting reporting services for your company

What is the definition & purpose of the compilation of annual financial statements?

A compilation refers to the preparation or assembly of a company’s financial statements by an external accountant. During a compilation, the external accountant converts the client’s financial data into financial statements without conducting any auditing procedures or providing assurance. This service is often included in an accounting firm’s write-up service.

When a compilation is performed, a compilation report is typically issued alongside the compiled financial statements. This report serves two main purposes:

1) it states that the financial statements are the representation of the company’s management, and

2) it clarifies that the accountant has not reviewed or audited the financial statements, therefore offering no opinion or assurances on their accuracy.

Compilations allow companies without an in-house accountant to have their financial statements prepared by an external professional without incurring the higher costs associated with reviewed or audited financial statements. While compilations do not provide the same level of assurance as audits or reviews, they still offer valuable financial information to support decision-making and fulfill specific reporting requirements.

When do companies need to compile annual financial statements?

While the specific requirements for preparing annual financial statements may vary widely and on the industry, general guidelines help determine when companies need to compile them. Here are some key instances when companies typically prepare annual financial statements:

  • Legal requirements: SA requires companies to prepare annual financial statements. Deadlines and standards vary. Entities include corporations, LLCs, and partnerships. Know your legal obligations.

  • Publicly listed companies: Publicly traded firms must publish annual financial statements for transparency and investor protection. External auditors ensure accuracy and reliability.

  • Private companies: Private firms often prepare annual financial statements voluntarily. It helps attract investors, secure loans, and provide financial information to stakeholders.

  • Banks and financial institutions: Banks and credit unions must maintain accurate financial records. Annual statements ensure regulatory compliance and provide transparency to stakeholders.

  • Grant requirements: Non-profits and grant-funded entities have reporting obligations. Annual financial statements demonstrate fund usage and accountability to government, foundations, and other sources.

  • Internal decision-making: Companies may create annual financial statements for internal purposes. They aid management in assessing performance, setting goals, and making strategic decisions.

Compilation of Annual Financial Statements

What is the process involved in compiling annual financial statements?

Compiling annual financial statements involves several essential steps to ensure accurate and reliable financial reporting. These steps typically include the following:

Compilation of Annual Financial Statements

  • Engagement planning: Defining the scope and objectives of the compilation engagement, considering applicable reporting frameworks and regulatory requirements.

  • Gathering financial data: Collecting all relevant financial data, including transaction records, bank statements, invoices, and other supporting documentation.

  • Organizing and analysing: Organising the financial data into appropriate categories and analysing transactions to ensure completeness and accuracy.

  • Adjusting entries: Making necessary adjustments, such as accruals, deferrals, and reclassifications, to align the financial statements with the accrual accounting principles and reporting standards.

  • Financial statement preparation: Using the adjusted financial data, prepare the core financial statements, including the balance sheet, income statement, statement of cash flows, and statement of changes in equity.

  • Supplementary disclosures: Providing additional information and explanatory notes to the financial statements to enhance transparency and provide a comprehensive understanding of the financial position and performance.

  • Compilation report: Issuing a compilation report, which accompanies the financial statements, provides an accountant’s independent assurance regarding the compilation process and the reliability of the compiled financial information.

Why choose HTCO Group in compiling annual financial statements?

HTCO Group’s chartered accountants have vast experience and offer comprehensive, specialist financial services. We pride ourselves on providing top-notch expertise in the compilation of annual financial statements. With a deep understanding of various international accounting standards, including IFRS (International Financial Reporting Standards) and IFRS for SMEs (Small and Medium-sized Entities), as well as UK GAAP (Generally Accepted Accounting Principles) under FRS 102, we offer a holistic approach to financial reporting. From multinational corporations to local businesses, our team is equipped with the knowledge and experience to deliver accurate and compliant financial statements tailored to your organisation’s needs. Our global drafting experience spans diverse jurisdictions, including the United Kingdom, Mauritius, Australia, and several African countries, such as Tanzania, Uganda, Ghana, Zambia, Bahrain, Kenya, and Namibia.

Insist on accurate and reliable financial reporting.

Contact HTCO accountants in South Africa for expert compilation of annual financial statements.

Compilation of Annual Financial Statements