What is the difference between annual accounts and an annual report?
The annual accounts contain the balance sheet, profit and loss account and notes. A management report also describes the course of business and outlook.
Short answer
The annual accounts contain the balance sheet, profit and loss account and notes. A management report also describes the course of business and outlook.
Basis: art. 2:361 and 2:391 DCC
Which documents belong to the annual accounts?
The annual accounts (jaarrekening) consist of the balance sheet, the profit and loss account and the notes to both (art. 2:361(1) DCC). The board prepares the full annual accounts; which parts of them become public depends on the size class.
A balance sheet describes assets, liabilities and equity on one date. The profit and loss account shows income and expenses over a period. The notes explain the accounting policies applied and important items. Suppose a BV has €200,000 turnover and a €30,000 result: those amounts belong in the internal annual accounts, while the version to be made public may be more limited for micro and small entities. The exact scope of publication follows from the size class. The annual accounts are therefore more than a collection of bank balances.
When is a management report needed?
The management report describes the course of business, the position on the balance sheet date, the risks and the expectations (art. 2:391 DCC). It is mandatory for medium-sized and large entities; micro and small entities are exempt.
The management report is a text by the board about the course of business, position and risks of the company. For micro and small entities there is an exemption; for medium-sized and large ones the report plays a separate role alongside the audited annual accounts. A management report may explain the figures, but cannot replace a missing balance sheet or notes. When growing, check in good time whether the class changes: the two-year system prevents a single outlier from changing all reporting rules at once. After important events, also describe how the board views future developments, to the extent the rules require it.
Why does everyday usage make a difference?
In everyday usage, 'annual report' (jaarverslag) is often used for the whole package: annual accounts, management report and other information together. Legally they are separate documents with their own requirements.
A financier may ask for 'the annual report' and mean the internal annual accounts with notes. For micro and small entities, the KVK in fact asks for a limited publication version. Therefore ask which document the recipient needs before you send anything. A public filing of the full internal set may reveal more turnover and result information than necessary. Keep the documents under separate file names, for example 'annual accounts adopted' and 'publication version'. That prevents a management report, a draft and a filed file from getting mixed up.
Which version do you share with which reader?
A shareholder may need the full adopted annual accounts to assess the appropriation of result. A bank may additionally ask for a management report or its own explanation of cash flows. The KVK receives the legally prescribed publication documents per size class, which for micro and small entities can be much more limited. A file named 'annual report final' is therefore insufficient to know what it contains. State on the cover page or in the file name whether it concerns the internal annual accounts, the management report, the other information or the publication version. This reduces the risk of a draft becoming public.
Take a company with €5 million turnover, 25 employees and €3 million assets. For the small class the publication may be limited, while the internal profit and loss account and its notes still have to be prepared. If the company changes size two years in a row, the regime for the management report and the audit may change. Therefore do a size class check every year before copying last year's table of contents. An old template may lack a document that is now mandatory, or make unnecessarily much information public. Keep the size class calculation with the version you submit.
Sources
Frequently asked questions
Is the management report the same as the notes?
No. The notes are part of the annual accounts; the management report is a separate document.
Must a small BV prepare a management report?
According to the KVK, micro and small entities are exempt from the statutory management report requirement.
May I publish the full report?
Only publish after a deliberate decision: for a smaller size class, the legally required publication version can be considerably more limited.
Read more
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.
Get started