Bilancio Aziendale: Coming Soon (Q1 2024 – Q2 2024)

Bilancio Aziendale

The company balance sheet (Bilancio Aziendale), or financial statement, is an indispensable tool for evaluating the economic result of a company.

It is considered a tool to measure the performance of a company. Without it, it would not be possible to measure some company parameters such as, for example, sales (turnover), debt status, liquidity, credits, capital owned, and trends over the years. Therefore, the financial statements allow you to assess the state of the company.

A company balance sheet is a complex document structured in different parts, representative of the equity, financial situation, and economic result for the year, which a company must prepare annually. The main purpose of the corporate balance sheet is fiscal, in fact, the taxes that the company is required to pay are determined through the financial statements.

All companies, even the simplified legal forms, draw up the balance sheet or year-end declaration. In fact, at the end of the year, everyone must equally determine a final result on the tax return on which to calculate taxes.

Other functions that the Bilancio Aziendale fulfills

Beyond the fiscal aspect, the document also fulfills other important functions. For example, it allows one to analyze the company's operations and compare its performance with those of competing companies. In addition, the annual financial statements are useful for understanding what consideration stakeholders (banks, investors, suppliers, etc.) have for the company since their strategies can often be influenced by the feedback in the financial statements.

Moreover, the weight that financial statements can have in guiding business strategies should not be underestimated: the information contained in the financial statements, in fact, represents objective feedback underlying business decisions.

Thus, the company's financial statements are an indispensable document both for the entrepreneur and for those who have an interest in knowing the company's performance (e.g., investors, and new shareholders).

Stakeholders interested in reading corporate financial statements

Shareholder and/or director: to check how much return on capital invested in the company or any corporate loss in case of distress;

Banks: to check the reliability and solvency of the company;

Treasury/tax authorities: to know the taxable income on which to calculate annual taxes;

Clients: to verify the continuity of the company in case of special assignments or contracts;

Suppliers: to check whether their receivables are creditworthy and assess the risk in the case of a new customer;

Company management: for careful management control analysis through some budget forecasting tools and internal audits;

Investors: in case there is a possibility of having external or internal investors.

What four informative documents must company financial statements contain:

1. Balance sheet is a statement showing the financial position of a company;

2. Income statement of all revenues and expenses incurred during the year; from the difference between expenses and revenues it is deduced whether the company is in profit or loss;

3. Notes on the financial statements illustrate and clarify the amounts reported in the balance sheet and income statement. It reports information that gives a true and fair view of the company's financial position and performance.

4. Cash flow statement represents cash inflows and outflows. The preparation of the cash flow statement is not mandatory for companies that prepare abbreviated financial statements and micro-enterprises.

The two levels of detail for a financial statement

The income statement and balance sheet report different levels of detail, depending on the size of the company:

Ordinary financial statements: this is the standard document, consisting of the balance sheet, income statement, notes on the financial statements, and cash flow statement, as stipulated in Article 2423 of the Civil Code, in effect since 2016; it covers medium-sized and large enterprises;

Abbreviated financial statements: does not include a cash flow statement; can only be used by micro and small enterprises.

Obligations of companies in regard to their financial statements

All companies above a certain turnover are required by law to prepare corporate financial statements annually, but not all are obliged to make them public by filing them with the Chamber of Commerce (CCIAA). This difference depends on the legal form of the company.

Thus, corporations (S.r.l., S.p.a., S.a.p.a.) are obliged to prepare financial statements following the standards prescribed by the Civil Code and must file them with the CCIAA in order to allow third parties to view them. While partnerships (sole proprietorships, S.n.c., S.a.s.) are not required to file financial statements with CCIAA, therefore, their financial statements are not public.

The obligation to prepare annual financial statements is governed by Article 2423 of the Civil Code (as amended by Legislative Decree 139 of August 18, 2015), which states, “The directors shall prepare annual financial statements, consisting of the balance sheet, income statement, cash flow statement, and notes to the financial statements. The financial statements must be prepared clearly and give a true and fair view of the company’s financial position and results of operations for the year.”

Bilancio Aziendale: Coming Soon (Q1 2024 – Q2 2024)