Translated by the Ministry of Economy
Consolidated version as of 1 July 2015
The law was promulgated in: official gazette Valstybės Žinios, 2001, No. 99-3516, ID 1011010ISTA00IX-575
Note of the Register of Legal Acts. A set of annual financial statements and an annual report of an undertaking for reporting periods starting on 1 January 2016 and later must be drawn up in accordance with this Law.
Seimas of the Republic of Lithuania, Law
No. XII-1696, 14 May 2015, published in the Register of Legal Acts on 27 May 2015, ID 2015-08160
Law on Amending Law No. IX-575 of the Republic of Lithuania on Financial Reporting by Undertakings
New version as of 1 July 2015:
No. XII-1696, 14 May 2015, published in the Register of Legal Acts on 27 May 2015, ID 2015-08160
LAW
OF THE REPUBLIC OF LITHUANIA
ON FINANCIAL REPORTING BY UNDERTAKINGS
6 November 2001 No. IX-575
Vilnius
CHAPTER ONE
GENERAL PROVISIONS
Article 1. Purpose of the Law
1. This Law establishes financial reporting by undertakings, the requirement to carry out an audit of financial statements of undertakings, the procedure of publishing financial statements of undertakings, the procedure of drawing up and publishing an annual report, a report on payments to state authorities, responsibility for drawing up and publishing of financial statements and an annual report of an undertaking.
Article 2. Scope of the Law
1. This Law shall be applied to undertakings that are limited civil liability profit-seeking legal entities (hereinafter referred to as “undertakings”) which are registered in the Republic of Lithuania in accordance with the procedure set forth by laws.
2. Where a general partnership, limited partnership or sole proprietorship, which are not under an obligation to draw up financial statements under this Law, take a decision on the drawing up of financial statements at their own discretion, they must draw up the financial statements in compliance with the requirements set by this Law.
3. The general partnerships and limited partnerships all general partners whereof are public limited liability companies or private limited liability companies, or which act as investment companies, must draw up financial statements and the annual report in compliance with the requirements set by this Law.
4. The procedure for drawing up financial statements of farmers’ farms shall be set forth by the Government of the Republic of Lithuania or an institution authorised by it.
5. This Law shall not apply to non-profit limited civil liability legal entities. The procedure for drawing up and presenting their financial statements shall be set forth by the Government of the Republic of Lithuania or an institution authorised by it, unless the laws regulating pursuit of their activities provide otherwise.
Article 3. Definitions
1. Reporting period shall mean a period for which a set of annual or interim financial statements of an undertaking is drawn up.
3. Financial year shall mean an annual reporting period for which a set of annual financial statements of an undertaking is drawn up.
4. Financial holding undertaking shall mean an undertaking, the sole direction of which activities is to acquire shares in other undertakings, to hold them and derive profit from this, without participating in management of those undertakings either directly or indirectly, without exercising an effect on their rights as those of a shareholder.
5. Balance sheet of an undertaking (hereinafter referred to as the “balance sheet”) shall be a financial statement showing the total assets, equity and liabilities of an undertaking on the last day of the reporting period.
6. Financial reporting by an undertaking shall mean the preparation of data on the financial position of an undertaking, performance, cash flows as well as explanation thereof in a set form.
7. Notes to financial statements of an undertaking (hereinafter referred to as the “notes”) shall be a financial statement explaining the amounts specified in an undertaking’s balance sheet, profit and loss account, cash flow statement and statement of changes in equity as well as providing additional material information not presented in other financial statements.
8. Set of financial statements of an undertaking (hereinafter referred to as a “set of financial statements”) shall mean a set of financial statements presenting financial data on the financial position of an undertaking, performance and cash flows.
9. Annual report of an undertaking (hereinafter referred to as the “annual report”) shall mean a report supplementing a set of annual financial statements of an undertaking and specifying data on an undertaking’s activities of the financial year and the activities envisaged as provided for by legal acts.
10. Set of annual financial statements of an undertaking (hereinafter referred to as “annual financial statements”) shall mean a set of financial statements compiled upon generalising data of the financial year.
11. Statement of changes in equity of an undertaking (hereinafter referred to as a “statement of changes in equity”) shall be a financial statement presenting data on changes in the equity of an undertaking over the reporting period.
12. Profit and loss account of an undertaking (hereinafter referred to as a “profit and loss account”) shall be a financial statement showing the total income earned and expenses incurred by an undertaking over the reporting period and performance, namely, profit or loss.
13. Cash flow statement of an undertaking (hereinafter referred to as a “cash flow statement”) shall be a financial statement showing the receipts and disbursements of cash and cash equivalents of an undertaking over the reporting period.
14. Head of an undertaking shall mean the head of a legal entity or the owner of a legal entity that does not have the head, or a representative of a small partnership. It is to be considered that the head of a business entity that is a partnership is a general partner, who is appointed to fulfil the duties of a management body indicated in paragraph 3 of Article 2.82 of the Civil Code of the Republic of Lithuania.
15. Stocktaking shall mean a verification of assets and liabilities and comparison of actual balance thereof with accounting data.
16. Material information shall mean the information a failure to present or incorrect presentation whereof may distort financial statements and affect the decisions taken by users of information of the financial statements.
17. Set of interim financial statements (hereinafter referred to as “interim financial statements”) shall mean a set of financial statements compiled upon generalising the data of a period shorter than the financial year.
18. Other concepts used in this Law shall be interpreted as they are defined in the Law of the Republic of Lithuania on Companies, the Law of the Republic of Lithuania on Audit (hereinafter referred to as the “Law on Audit”), the Law of the Republic of Lithuania on Accounting (hereinafter referred to as the “Law on Accounting”), the Law of the Republic of Lithuania on Securities and other legal acts.
CHAPTER TWO
CATEGORIES OF UNDERTAKINGS
Article 4. Micro, small, medium-sized and large undertakings
1. Micro undertakings shall be undertakings, at least two indicators of which do not exceed the following amounts on the last day of a financial year:
2. Small undertakings shall be undertakings, at least two indicators of which do not exceed the following amounts on the last day of a financial year:
3. Medium-sized undertakings shall be undertakings, at least two indicators of which do not exceed the following amounts on the last day of a financial year:
4. Large undertakings shall be undertakings, at least two indicators of which exceed the amounts indicated in paragraph 3 of this Article on the last day of a financial year.
5. Net sales revenue shall be income earned from sale of goods and services in a reporting financial year, less amounts of sales of returned goods, mark-down, rebate amounts.
6. The average annual number of payroll employees shall be calculated under the procedure set by the Government of the Republic of Lithuania or an institution authorised by it.
7. An undertaking shall be assigned to another category of undertakings in case the indicators specified in paragraphs 1–4 of this Article are not exceeded or start to be exceeded on the last day of a financial year for two financial years in sequence.
8. When a micro undertaking does not opt to apply exceptions allowed for micro undertakings, which are provided for in Articles 20, 22 and 23 of this Law, it shall be subject to the same requirements as small undertakings. Exceptions allowed for micro undertakings shall not apply to financial holding undertakings, also to public limited liability companies and private limited liability companies, prices of goods (services) of which are regulated under the procedure set by laws.
CHAPTER THREE
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Article 5. Application of Generally Accepted Accounting Principles to the Drawing up of Financial Statements
1. Financial statements must be drawn up to give a true and fair view of an undertaking’s assets, equity, liabilities, income and expenses as well as cash flows if the undertaking draws up a cash flow statement.
2. All undertakings shall keep accounts and draw up financial statements in conformity with the following generally accepted accounting principles:
Article 6. Principle of an Undertaking
1. Every undertaking drawing up financial statements shall be considered a separate accounting entity.
Article 7. Principle of an undertaking as a going concern
1. In drawing up financial statements, the following assumption shall be made:
Article 8. Principle of Periodicity
Article 9. Principle of Consistency
Article 10. Principle of Monetary Measurement
Article 11. Principle of Accrual-based Accounting
Economic operations and economic events shall be recorded in the accounts of the undertaking after they take place and shall be presented in the financial statements of those reporting periods regardless of receipt or disbursement of cash. According to the principle of accrual-based accounting, income shall be recorded in the period in which it is earned, and expenses – in the period in which they are incurred.
Article 12. Principle of the Comparability
The income of an undertaking earned over the reporting period shall be related to the expenses incurred in order to earn the income. Financial statements must be drawn up so that users of the information of financial statements could compare the information presented therein with the information of other reporting periods and the information presented by other undertakings and correctly assess changes in the financial condition, performance of an undertaking, as well as cash flows in the undertaking draws up cash flow statements. Financial statements must contain the information of the reporting year and at least one preceding financial year.
Article 13. Principle of Prudence
Article 14. Principle of Neutrality
CHAPTER FOUR
REQUIREMENTS FOR THE DRAWING UP OF FINANCIAL STATEMENTS
Article 16. General Requirements for Drawing up of Financial Statements
2. Undertakings shall draw up interim financial statements where necessary or under the procedure or at the intervals specified by other legal acts.
3. Newly registered undertakings shall draw up a balance sheet of the commencement of economic activities indicating the assets, equity and liabilities of an undertaking at the commencement of activities.
4. Financial statements shall be drawn up in compliance with this Law, the Business Accounting Standards or the International Accounting Standards (hereinafter referred to as “accounting standards”), as established in the Law on Accounting. Notes must indicate accounting standards, according to which financial statements have been drawn up.
5. Financial statements shall be drawn up using the euro or, if necessary, both the euro and a foreign currency.
6. Financial statements shall be drawn up in the Lithuanian language and, where necessary, in a foreign language.
7. All economic operations and economic events of a reporting period must be recorded in the accounts of an undertaking prior to the drawing up of financial statements.
8. Accounting data shall be based on the data of stocktaking of assets and liabilities. The procedure for stocktaking shall be set forth by the Government of the Republic of Lithuania or an institution authorised by it.
9. The amounts in items of financial statements at the beginning of the reporting financial year must correspond to the amounts in respective items of financial statements of the end of the preceding financial year.
10. Undertakings shall draw up financial statements according to the data of the last day of the reporting period. Where a decision has been taken on the winding up or reorganisation of an undertaking, the undertaking must draw up financial statements both according to data of the day of the taking of the decision and data of the day of completion of the reorganisation of the undertaking.
11. Forms of the balance sheet and the profit and loss account of one financial year cannot differ from forms of other financial years.
12. Where the generally accepted accounting principles and other requirements of this Law as well as the accounting standards are insufficient for financial statements to give a true and fair view of an undertaking’s assets, equity, liabilities, income and expenses as well as cash flows, if the undertaking draws up a cash flow statement, additional information must be supplied in the notes.
13. Where in exceptional cases the financial statements drawn up by applying the generally accepted accounting principles and the accounting standards are incompatible with the requirement set in paragraph 1 of Article 5 of this Law, the accounting standards and generally accepted accounting principles may be departed from in order to meet the requirement of paragraph 1 of Article 5 of this Law to give a true and fair view of an undertaking’s assets, equity, liabilities, income and expenses as well as cash flows, if the undertaking draws up a cash flow statement. Any departure from the accounting standards, the reasons for it and its effect on the undertaking’s assets, equity, liabilities, income and expenses as well as cash flows, if the undertaking draws up a cash flow statement, shall be disclosed in the notes.
14. It shall be considered that financial statements drawn up by micro undertakings according to exceptions given in paragraph 2 of Article 20 and paragraph 2 of Article 22 of this Law are not contrary to the requirement set in paragraph 1 of Article 5 of this Law, therefore paragraph 13 of this clause shall not apply to such financial statements.
Article 17. Valuation of Assets and Liabilities
1. When drawing up financial statements, undertakings shall valuate assets, equity and liabilities in compliance with generally accepted accounting principles and accounting standards.
Article 18. Financial Year
1. The financial year of an undertaking shall last 12 months. Undertakings shall select the financial year by taking account of the nature of their activities.
2. The financial year may be changed not more than once per five years. This provision shall not apply where an undertaking changes its financial year to a financial year coinciding with a calendar year.
3. The first financial year of an undertaking which is commencing economic activities shall be a period from the day of its establishment until the end of the financial year. The end of the financial year of an undertaking which is changing its financial year shall be the end of a new financial year where the period from the beginning of the financial year until the end of the new financial year does not exceed 18 months. Where this period exceeds 18 months, a transitional financial year shall be established, and the beginning thereof shall be the end of an old financial year, and the end shall be the beginning of a new financial year.
CHAPTER FIVE
FINANCIAL STATEMENTS
Article 20. Components of a Set of Financial Statements
1. A set of financial statements of small undertakings shall consist of the following financial statements:
2. Micro undertakings can omit drawing up notes and then the set of their financial statements shall consist of the following financial statements:
3. A set of financial statements of medium-sized and large undertakings shall consist of the following financial statements:
4. Small undertakings, in addition to financial statements indicated in paragraph 1 of this Article, can draw up a cash flow statement and a statement of changes in equity indicated in paragraph 3 of this Article at their own discretion.
5. All financial statements indicated in paragraphs 1, 2 and 3 of this Article shall constitute a composite whole.
Article 21. General Requirements for the Layout of Financial Statements
At the beginning of each financial statement, the following particulars must be given:
1) legal form, name, code of an undertaking, register where data about the undertaking is collected and kept, address of the registered office and legal status if the undertaking is in liquidation, reorganisation or is bankrupt;
Article 22. Abridged and Short Financial Statements
1. The requirements for an abridged balance sheet, short balance sheet, short profit and loss account shall be set by the Business Accounting Standards if financial statements are drawn up according to the Business Accounting Standards.
2. If a micro undertaking opts to apply the exceptions indicated in paragraph 2 of Article 20 and in paragraph 5 of Article 23 of this Law, it shall present the following (if any) after the balance sheet:
1) information about off-balance sheet financial commitments, guarantees, contingent liabilities, contingent assets in total amounts, indicating the type and character of all significant collaterals;
2) information about all commitments related to pensions according to long-term remuneration schemes and companies of a company group, joint ventures or associated companies controlled according to a joint venture agreement;
3) information about amounts of advance payments made and loans granted to the head of the undertaking, members of management and supervisory bodies, indicating interest rates, main terms and conditions of the loans and all repaid, written-off or waived amounts, also the amounts of commitments assumed by the undertaking by giving all types of guarantees for these persons, separately indicating the amount intended for the head of the undertaking, members of management and supervisory bodies;
3. Requirements for the components and layout of a set of financial statements of small partnerships and legal entities of unlimited civil liability indicated in paragraph 2 of Article 2 of this Law are set by the Business Accounting Standards if financials statements are drawn up according to the Business Accounting Standards.
CHAPTER SIX
ANNUAL REPORT
Article 23. Annual Report
1. Public limited liability companies, private limited liability companies, general partnerships and limited partnerships all general partners whereof are public limited liability companies or private limited liability companies must draw up the annual report in addition to annual financial statements.
2. The annual report must include:
1) a fair review of an undertaking’s position, the performance and development of the undertaking’s business, a description of the principal risks and uncertainties that it faces;
2) analysis of financial and non-financial performance, information relating to environmental and employee matters;
4) the number of all the shares acquired by the undertaking and the undertaking’s own shares as well as nominal value thereof and a part of the authorised capital made up by these shares;
5) the number of the own shares acquired and transferred during the reporting period, nominal value thereof and a part of the authorised capital made up by these shares;
6) information about payment for own shares, where they are acquired or transferred against payment;
12) where the undertaking uses financial instruments and where this is of importance for the evaluation of the undertaking’s assets, equity, liabilities, income and expenses, information about financial risk management objectives, used hedging instruments, for which hedge accounting is used, and the undertaking’s exposure to price risk, credit risk, liquidity risk and cash flow risk.
3. In respect of the undertakings whose securities are admitted to a regulated market, the following information must, in addition to the information specified in paragraph 2 of this Article, be presented in a separate part of the annual report:
1) reference to the applied code (codes) of corporate governance and the medium of its (their) publication and/or reference to the entire required information published about the undertaking’s governance practice;
2) in the event of derogation from provisions of the applied code (codes) of corporate governance and/or a failure to comply therewith, those provisions and the reasons for derogating from and/or not complying with them shall be indicated;
3) information about the scope of risk and management thereof – management of various types of risk, measures of reduction thereof and the internal control system of the undertaking shall be described;
5) information about the shareholders holding special control rights and a description of those rights;
6) information about all existing restrictions of voting rights, such as restrictions of the voting rights of the persons holding a certain percentage or number of votes, the time limits until the expiry whereof the voting rights may be exercised or the systems according to which the property rights as granted by securities are separated from the holding of the securities;
7) information about the rules regulating election and replacement of members of the board, also amendments to the undertaking’s articles of association;
9) information about the competence of the general meeting of shareholders, rights of shareholders and exercise thereof, unless this information has been provided for by laws;
4. The annual report may be subject to additional requirements set by the laws and other legal acts regulating pursuit of activities of undertakings or an undertaking’s articles of association.
5. Micro and small undertakings can omit to draw up the annual report, but the information indicated in subparagraphs 4, 5, 6 and 7 of paragraph 2 of this Article must be disclosed by micro undertakings under their balance sheet, whereas by small undertakings – in the notes.
6. Small and medium-sized undertakings can omit to present non-financial information indicated in subparagraph 2 of paragraph 2 of this Article.
7. A certified auditor or audit firm shall give an opinion in the auditor’s report on the information prepared according to subparagraphs 3, 4, 5, 6, 7 and 8 of paragraph 3 of this Article and shall check presentation of the information indicated in subparagraphs 1, 2, 9 and 10 of paragraph 3 of this Article.
CHAPTER SEVEN
AUDIT OF FINANCIAL STATEMENTS. SIGNATURE, APPROVAL AND PUBLICATION OF FINANCIAL STATEMENTS AND THE ANNUAL REPORT
Article 24. Audit of Financial Statements
1. Annual financial statements of state-owned and municipal enterprises, public interest entities, public limited liability companies, private limited liability companies specified in paragraph 2 of this Article, cooperative societies (cooperatives), general partnerships and limited partnerships all general partners whereof are public limited liability companies or private limited liability companies, also private limited liability companies a shareholder whereof is the State and/or a municipality, private limited liability companies, prices of goods (services) of which are regulated under the procedure set by laws, must be audited.
2. Annual financial statements of private limited liability companies, cooperative societies (cooperatives), general partnerships and limited partnerships all general partners whereof are public limited liability companies or private limited liability companies must be audited where at least two indicators thereof on the last day of the financial year exceed the following limits:
Article 25. Signature and Approval of Financial Statements and the Annual Report
1. Financial statements and the annual report shall be signed by the head of an undertaking (his position, name and surname shall be specified). Financial statements shall also be signed by the chief accountant (accountant) of an undertaking or other persons who can keep accounts of an undertakings according to the Law on Accounting (position, name and surname shall be specified).
Article 26. Publication of Annual Financial Statements and the Annual Report
1. The financial statements and the annual report together with an auditor’s report (in the cases when audit has been carried out) shall be published in the Register of Legal Entities in the cases and in accordance with the procedure set forth by laws and other legal acts, and those of the undertakings listed in paragraph 9 of Article 4 of this Law, also of public limited liability companies and private limited liability companies, prices of goods (services) of which are regulated under the procedure set by laws shall also be published on their websites.
CHAPTER EIGHT
STORAGE OF FINANCIAL STATEMENTS AND THE ANNUAL REPORT, RESPONSIBILITY FOR THEIR DRAWING UP AND SUBMISSION TO THE REGISTER OF LEGAL ENTITIES
Article 27. Procedure for Storing Financial Statements and the Annual Report
Article 28. Responsibility for Drawing up and Submission of Financial Statements and the Annual Report to the Keeper of the Register of Legal Entities
The responsibility for the drawing up of an undertaking’s financial statements and the annual report and submission thereof together with the auditor’s report (in case the audit has been performed) to the keeper of the Register of Legal Entities shall rest with the head of the undertaking and members of management and supervisory bodies in accordance with the procedure laid down by laws within the sphere of competence assigned by the laws respectively to the head and the management and supervisory bodies. The head of an undertaking and members of management and supervisory bodies who fail to perform, or perform inappropriately, the duties related to the drawing up and submission of the undertaking’s financial statements and the annual report together with the auditor’s report (in case the audit has been performed) to the keeper of the Register of Legal Entities according to the sphere of competence assigned by laws respectively to the head and management and supervisory bodies must compensate for the entire incurred damage to the undertaking and/or other persons.
CHAPTER NINE
REPORT ON PAYMENTS TO STATE AUTHORITIES
Article 29. Report on Payments to State Authorities
1. Large undertakings and public interest entities, which are undertakings in the extractive industry or primeval forest logging undertakings, as they are defined in a legal act of the Government of the Republic of Lithuania or an institution authorised by it, which sets forth requirements for drawing up a report on payments to state authorities, much draw up a report on payments to state authorities in each financial year.
2. A duty to draw up a report on payments to state authorities shall not apply to an undertaking which is a subsidiary or a parent undertaking if:
3. A report on payments to state authorities shall be submitted and published together with financial statements and the annual report in the Register of Legal Entities.
I promulgate this Law passed by the Seimas of the Republic of Lithuania.
PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS
Annex to the Law of the Republic of
Lithuania on Financial Reporting by
Undertakings
LEGAL ACTS OF THE EUROPEAN UNION IMPLEMENTED BY THE LAW
1. Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (OJ 2004 special edition, Chapter 13, Volume 29, p. 609).
2. Commission Regulation (EC) No. 1126/2008 of 3 November 2008 adopting certain international accounting standards in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council (OJ 2008 L 320, p. 1).
3. Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ 2013 L 182, p. 19).