Notes (toelichting)
The part of the annual accounts that explains the balance sheet and P&L: valuation policies, movement schedules and mandatory disclosures. Without notes, annual accounts are incomplete (art. 2:362 DCC).
What do the notes (toelichting) mean?
The part of the annual accounts that explains the balance sheet and P&L: valuation policies, movement schedules and mandatory disclosures. Without notes, annual accounts are incomplete (art. 2:362 DCC).
The notes explain the chosen policies and amounts that cannot be understood from the balance sheet and profit and loss account alone. Their scope depends on statutory exemptions, but the content must still give a true and fair view.
How does it work?
The notes are not an appendix but part of the annual accounts: art. 2:361(1) DCC defines the annual accounts as the balance sheet and the profit and loss account with the notes. They follow the order of the line items (art. 2:363(1) DCC) and contain the policies for valuation and determination of result (art. 2:384(5) DCC), the breakdown of items and information that does not appear from the figures, such as obligations not included in the balance sheet (art. 2:381(1) DCC).
How much you explain depends on the class. For micro entities the rules on notes lapse almost entirely (art. 2:395a(6) DCC). Small entities omit, among other things, the turnover segmentation, the remuneration of directors and the auditor’s fees (art. 2:396(5) DCC). Medium-sized entities are exempt from articles 2:380 and 2:382a (art. 2:397(4) DCC). Large entities explain everything.
Example
A small BV has a bank loan of € 50,000, of which € 10,000 is repaid within a year; the bank has a pledge on the equipment. The balance sheet shows € 50,000 under liabilities. The notes state: remaining term longer than a year € 40,000 (art. 2:375(2) DCC) and the pledge as security (paragraph 3). In addition: the policy ‘acquisition cost, straight-line depreciation’, a lease that still runs for three years at € 24,000 per year, so € 72,000 of obligations outside the balance sheet, and an average of four employees.
In the annual accounts
Notes to the annual accounts; micro entities have strongly limited notes.
Difference from the management report
The notes belong to the annual accounts and explain the figures. The management report is a separate document in which the board discusses the course of business, the risks and the expectations (art. 2:391 DCC). Micro and small entities do not have to prepare a management report (art. 2:396(7) DCC), whereas small entities do have notes.
Common mistakes
- Omitting a mandatory disclosure because the amount seems small
- Including text without a link to the figures
What to watch for
- Go through every balance sheet item: is there a term, security, movement or policy that a reader needs?
- Disclosures on the movement in equity, employees and directors may never lapse because of minor significance (art. 2:363(3) DCC).
- If you change a policy, add the reason and the effect on equity and result (art. 2:384(6) DCC). Detail per component: notes to the annual accounts.
Legal basis and sources
art. 2:362 and 2:375 DCC
Frequently asked questions
Must a micro BV prepare notes?
Hardly. The rules on notes do not apply to micro entities (art. 2:395a(6) DCC). Below the balance sheet it is stated whether accruals were omitted and whether tax-based policies were applied.
Are the notes filed?
For small, medium-sized and large entities yes. For micro entities no, because only the abridged balance sheet is made public (art. 2:395a(8) DCC).
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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