Management Accounts/Reports VS Financial Statements

Audited Financial Statements and Management Accounts/Reports are both important tools for a business but each one serves a different purpose.

Management Accounts (MA)

MA provide information to people within or outside a business. These reports are not audited by an external auditor and are not filed to any Authorities in Cyprus. There is no formal structure relating to the MA and this is determined by the management of a company in accordance to the Directors’/Shareholders’ requirements i.e. whether they wish to determine the profitability of the business, its ability to generate cash (and the sources and uses of that cash), to determine whether a business has the capability to pay back its debts and/or in order to derive financial ratios that may indicate the condition of the business etc.

MA may be prepared as of any date at any time of a year upon such demand and are largely based on accounting records. Figures that appear in these MA may have material misstatements since they are unaudited.  MA mainly include Profit and Loss and Balance Sheet Reports but are certainly not limited to these.  They may also comprise of all information included in the financial statements with the only difference the non-inclusion of the auditor’s report (see below).   As aforementioned, these accounts may be used for taking up management decisions during a year or even requested by external parties i.e. financial institutions.  

Audited Financial Statements (FS)

Each Cyprus entity must lodge on an annual basis FS to the Cyprus Registrar of Companies and the Official Receiver.  Companies Law requires that the financial reports must be prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standard (IFRS) requirements.  Further, such reports must be audited by a qualified accountant in Cyprus.  

Companies Law requires every company to prepare FS.  These are submitted annually to the Registrar of Companies and are also used for the preparation of the company’s tax return, which is submitted to the Cyprus Income Tax Authorities.

FS, besides the Profit and Loss and Balance Sheet Reports, include other important financial information, accounting policies of the business, as well as the auditor’s report.  

The auditor’s report may be unqualified (also known as a clean report) or qualified. In an unqualified report, the auditors conclude that the financial statements of your business present fairly its affairs in all material aspects.  Such a report implies that any changes in the accounting policies, their application and effects, are adequately determined and disclosed (and that the financial report is transparent and has not hidden important facts).

Consolidated Financial Statements

Cyprus Companies that control either directly or indirectly other companies (subsidiaries) have to prepare consolidated FS for the Group of companies, which will have to be audited by a registered auditor in Cyprus.

If a subsidiary company belonging to the Group prepares and lodges Statutory Consolidated Financial Statements in its jurisdiction, then an exemption may be granted. Furthermore if the Group doesn't exceed two of the following criteria, then again an exemption may be granted:

  1. If the net assets of the Group do not exceed €20 million.
  2. If the turnover of the Group does not exceed €40 million.
  3. If the personnel of the Group does not exceed 250 employees during the year.

Multilysis is in a position to offer the following:

  1. Book-keeping services
  2. Arranging for the audit
  3. Registration with Cyprus Income Tax, V.A.T. & Social Insurance Department
  4. Contacting the Registrar of Companies in Cyprus for all necessary submissions of forms and requests for certificates in compliance with the Law.