LIETUVOS RESPUBLIKOS

LIETUVOS RESPUBLIKOS OFFICIAL TRANSLATION REPUBLIC OF LITHUANIA LAW ON FINANCIAL STATEMENTS OF ENTITIES 6 November 2001 No IX-575 (As last amended on 26 June 2008 – No X-1633) Vilnius CHAPTER ONE GENERAL PROVISIONS Article

1. Purpose of the Law
2. This Law shall establish financial statements of entities, the requirement to carry out an audit of financial reports, drawing up of an annual report, responsibility for the drawing up and publishing of financial reports and the annual report.
3. This Law has the objective of harmonising regulation of financial statements of entities, the drawing up of an annual report, the requirement to carry out audit of financial reports, responsibility for the drawing up and publishing of financial reports and the annual report with the EU legal acts listed in the Annex to this Law. Article
4. Scope of the Law
5. This Law shall be applied to the limited civil liability profit-seeking legal persons (hereinafter referred to as “entities”) which are registered in the Republic of Lithuania in accordance with the procedure set forth by laws.
6. Where a general partnership, limited partnership or individual enterprise, which are not under an obligation to draw up financial reports under this Law, take a decision on the drawing up of the financial reports at their own discretion, they must draw up the financial reports in compliance with the requirements set by this Law.
7. The general partnerships and limited partnerships all participants whereof are public limited liability companies or private limited liability companies must draw up financial reports and the annual report in compliance with the requirements set by this Law.
8. The procedure for drawing up financial reports of farmer’s farms shall be set forth by the Government or an institution authorised by it.
9. This Law shall not apply to non-profit limit civil liability legal persons. The procedure for drawing up and presenting their financial reports shall be set forth by the Government or an institution authorised by it, unless the laws regulating pursuit of their activities provide otherwise.
10. In respect of financial institutions, the laws and other legal acts regulating pursuit of their activities may set forth additional requirements regarding financial reports.
11. In respect of banks and other credit institutions, insurance undertakings and reinsurance undertakings, Article 21, paragraphs 1, 2, 3 and 4 of Article 25 and Article 27 of this Law shall apply. Article
12. Definitions
13. “Reporting period” shall mean a period for which a set of annual or interim financial reports of an entity is drawn up.
14. “Item of a financial report” shall mean a line of data of a financial report.
15. “Financial year” shall mean a period for which a set of annual financial reports of an entity is drawn up.
16. “Balance sheet of an entity” (hereinafter referred to as the “balance sheet”) shall be a financial report showing the total assets, equity and liabilities of an entity on the last day of the reporting period.
17. “Financial statements of an entity” shall mean the preparation of data on the financial position of an entity, performance, cash flows as well as disclosure thereof in a set form.
18. “Notes on the accounts of financial reports of an entity” (hereinafter referred to as “notes on the accounts”) shall be a financial report disclosing the amounts specified in an entity’s balance sheet, profit (loss) account, cash flow statement and statement of changes in equity as well as providing as well as additional material information not presented in other financial reports.
19. “Set of financial reports of an entity” (hereinafter referred to as a “set of financial reports”) shall mean a set of financial reports presenting financial data on the financial position of an entity, performance and cash flows.
20. “Set of annual financial reports of an entity” (hereinafter referred to as “annual financial reports”) shall mean a set of financial reports compiled upon generalising data of the financial year of an entity.
21. “Annual report of an entity” (hereinafter referred to as the “annual report”) shall mean a report supplementing annual financial reports and specifying data on an entity’s activities of the financial year and the activities envisaged as provided for by legal acts.
22. “Statement of changes in equity of an entity” (hereinafter referred to as a “statement of changes in equity”) shall be a financial report presenting data on changes in the equity of an entity over the reporting period.
23. “Profit (loss) account of an entity” (hereinafter referred to as a “profit (loss) account”) shall be a financial report showing the total income earned by an entity over the reporting period as well as the expenditure incurred in order to earn the income and performance, namely, profit or loss.
24. “Cash flow statement of an entity” (hereinafter referred to as a “cash flow statement”) shall be a financial report showing the receipts and disbursements of cash and cash equivalents of an entity over the reporting period.
25. “Stocktaking” shall mean a verification of assets and liabilities and comparison of actual balance thereof with accounting data.
26. “Material information” shall mean the information a failure to present or incorrect presentation whereof may distort financial reports and affect the decisions taken by users of information of the financial reports.
27. “Set of interim financial reports” (hereinafter referred to as “interim financial reports”) shall mean a set of financial reports compiled upon generalising the data of a period shorter than the financial year.
28. Other concepts used in this Law shall be interpreted as they are used in the Republic of Lithuania Law on Accounting, the Republic of Lithuania Law on Companies, the Republic of Lithuania Law on Audit and the Republic of Lithuania Law on Securities. CHAPTER TWO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Article
29. Application of Generally Accepted Accounting Principles to the Drawing up of Financial Reports
30. Financial reports must be drawn up to give a true and fair view of an entity’s assets, equity, liabilities, income and expenditure as well as cash flows.
31. All entities shall handle accounting and draw up financial reports in conformity with the following generally accepted accounting principles: 1) principle of an entity; 2) an entity’s going concern principle; 3) periodicity; 4) consistent accounting methods; 5) monetary measurement; 6) accrual-based accounting; 7) comparability; 8) principle of prudence; 9) neutrality; 10) precedence of content over form. Article
32. Principle of an Entity
33. Every entity drawing up financial reports shall be considered a separate accounting unit.
34. The assets, equity and liabilities, income and expenditure of such an entity alone shall be accounted. Article
35. Entity’s Going Concern Principle
36. As regards the handling of accounting, the following assumption shall be made: 1) the period of activities of an entity is unlimited; 2) the entity will not be wound up in the foreseeable future.
37. This principle shall not be applied, where a decision is taken on the winding up of an entity as well as in respect of the entities established for a limited period of activities. Article
38. Principle of Periodicity As regards the handling of accounting, activities of an entity shall be divided into financial years or the reporting periods of other duration at the end whereof financial reports shall be drawn up. Article
39. Principle of Consistent Accounting Methods
40. An entity must consistently apply the selected accounting method.
41. An accounting method may be changed only in order to give a fair view of an entity’s assets, equity, liabilities, income and expenditure as well as cash flows for the reporting period. Article
42. Principle of Monetary Measurement The entire assets, equity capital, liabilities, income and expenditure as well as cash flows of an entity shall be expressed in financial reports in money terms. Article
43. Principle of Accrual-based Accounting Economic operations and economic events shall be accounted after they take place and are presented in the financial reports of those reporting periods regardless of whether cash is received or disbursed. According to the principle of accrual-based accounting, income shall be recorded in the period in which it is earned, and expenditure – in the period in which it is incurred. Article
44. Principle of the Comparability The income of an entity earned over the reporting period shall be related to the expenditure incurred in order to earn the income. Financial reports must be drawn up so that users of the information of financial reports could compare the information presented therein with the information of other reporting periods and the information presented by other entities and correctly assess changes in the financial condition of an entity, performance and cash flows thereof. Financial reports must contain the information of the reporting year and at least one preceding financial year. Article
45. Principle of Prudence An entity shall select the accounting methods such as cannot unreasonably increase or unreasonably reduce the value of the entity’s assets, equity and liabilities as well as income and expenditure. Article
46. Principle of Neutrality Accounting information shall be presented in an unbiased manner. Presentation thereof should not affect the decisions taken by users of the information of financial reports, and it should not be aimed at a pre-set result. Article
47. Precedence of Content over Form Economic operations and economic events shall be accounted according to their content and economic substance and not merely according to their legal form. CHAPTER THREE REQUIREMENTS FOR THE DRAWING UP OF FINANCIAL REPORTS Article
48. General Requirements for the Drawing Up of Financial Reports
49. Entities shall draw up annual financial reports at the end of their financial year.
50. Entities shall draw up interim financial reports where necessary or on a periodic basis specified by other legal acts.
51. Newly registered entities shall draw up a balance sheet of the commencement of economic activities indicating the assets, equity and liabilities of an entity at the commencement of activities.
52. Financial reports shall be drawn up in compliance with this Law, the Business Accounting Standards or the International Accounting Standards (hereinafter referred to as “accounting standards”) and other legal acts.
53. The entities whose securities are admitted on a regulated market shall draw up financial reports according to international accounting standards, and other entities may select whether to draw up the financial reports according to the Business Accounting Standards or the International Accounting Standards, and such a choice may not be altered earlier than after the lapse of 5 years (with the exception of the case when an entity joins a group of entities). The non-limited civil liability legal persons indicated in paragraphs 2 and 3 of Article 2 of this Law shall draw up financial reports according to the Business Accounting Standards.
54. The notes on the accounts must specify the accounting standards according to which financial reports have been drawn up.
55. Financial reports shall be drawn up using the monetary unit of the Republic of Lithuania – the Litas.
56. Financial reports shall be drawn up in the Lithuanian language and, where necessary, in a foreign language.
57. All economic operations and economic events of a reporting period must be accounted by an entity prior to the drawing up of financial reports.
58. Accounting data shall be based on the data of the 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.
59. The amounts in items of financial reports at the beginning of the reporting financial year must correspond to the amounts in respective items of financial reports of the end of the preceding financial year.
60. Entities shall draw up financial reports according to the data of the last day of the reporting period. The events occurred since the end of the financial year until the drawing up of financial reports shall be registered in accordance with the procedure set forth by the accounting standards. Where a decision has been taken on the winding up or reorganisation of an entity, the entity must draw up a balance sheet according to both data of the day of the taking of the decision and data of the day of the reorganisation.
61. Where the generally accepted accounting principles and other requirements of this Law as well as the accounting standards are insufficient for financial reports to give a true and fair view of an entity’s assets, equity, liabilities, income and expenditure as well as cash flows, additional information must be supplied in the notes on the accounts.
62. Where in exceptional cases the financial reports drawn up by applying the generally accepted accounting principles and the accounting standards are incompatible with the requirement set in paragraph 1 of Article 4 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 4 of this Law to give a true and fair view of an entity’s assets, equity, liabilities, income and expenditure as well as cash flows. Any departure from the accounting standards, the reasons for it and its effect on the entity’s assets, equity, liabilities, income and expenditure as well as cash flows shall be disclosed in the notes on the accounts. Article
63. Valuation of Assets and Liabilities
64. When drawing up financial reports, entities shall valuate assets, equity and liabilities in compliance with generally accepted accounting principles and accounting standards.
65. Every asset, equity capital and liability item of a financial report shall be valuated separately. Any set-off between fixed and current asset, equity, long-term and short-term liability, income and expenditure items of financial reports shall be prohibited, with the exception of the cases specified by the accounting standards. Article
66. Financial Year
67. The financial year of an entity shall last 12 months. Entities shall select the financial year by taking account of the nature of their activities.
68. The financial year may be changed not more than once per five years. This provision shall not apply where an entity changes its financial year to a financial year coinciding with a calendar year.
69. The financial year of an entity 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 entity 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. Article
70. Correction of Errors The procedure for correcting the errors discovered after the approval of annual financial reports shall be set forth by the accounting standards. Article
71. Signature and Approval of Financial Reports and the Annual Report
72. Financial reports and the annual report shall be signed by the head of an entity (his position, name and surname shall be specified).
73. Financial reports and the annual report shall be approved in accordance with the procedure set forth by laws. Article
74. Audit of Annual Financial Reports
75. Annual financial reports of state-owned and municipal enterprises, public interest entities, public limited liability companies, the private limited liability companies, cooperative societies (cooperatives), general partnerships and limited partnerships all participants whereof are public limited liability companies or private limited liability companies as specified in paragraph 2 of this Article, also the private limited liability companies a shareholder whereof is the State and/or a municipality must be audited.
76. Annual financial reports of private limited liability companies, cooperative societies (cooperatives), general partnerships and limited partnerships all participants 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: 1) net turnover during the reporting financial year – LTL 12 million; 2) the value of the assets specified in the balance sheet – LTL 6 million; 3) average annual number of pay-roll workers during the reporting financial year – 50 persons.
77. Paragraph 4 of Article 24 of this Law shall apply to the net turnover, and paragraph 5 of Article 24 of this Law shall apply to the average annual number of pay-roll workers. ‑{}‑
78. Annual financial reports shall be audited in compliance with the Republic of Lithuania Law on Audit and other legal acts. Article
79. Publication of Annual Financial Reports and the Annual Report
80. The approved annual financial reports and the annual report together with an auditor’s report (in the cases when audit has been carried out or must be carried out according to the law) shall be published in the Legal Entities Register in the cases and in accordance with the procedure set forth by laws and other legal acts.
81. The published annual financial reports and the annual report must be reproduced in the form and text on the basis of which an auditor has drawn up his report. CHAPTER FOUR FINANCIAL REPORTS Article
82. Components of a Set of Financial Reports
83. A set of financial reports shall consist of the following financial reports: 1) balance sheet; 2) profit (loss) account; 3) cash flow statement; 4) statement of changes in equity; 5) notes on the accounts.
84. All financial reports drawn up in compliance with requirements of this Law shall constitute a composite whole. Article
85. General Requirements for the Layout of Financial Reports At the beginning of each financial report, the following particulars must be given: 1) name, code and address of the registered office of an entity; 2) the reporting period, the last day of the reporting period; 3) the level of precision used in the presentation of figures (indicators) in a financial report (it shall be specified whether the indicators are expressed in Litas or thousands of Litas). Article
86. Abridged Financial Reports
87. The entities at least two indicators whereof on the last day of the financial year do not exceed the following limits for two consecutive financial years, including the reporting financial year, shall be allowed to draw up of an abridged balance sheet, abridged profit (loss) account, abridged notes on the accounts and not to draw up a cash flow statement: 1) net turnover during the reporting financial year – LTL 10 million; 2) the value of the assets specified in the balance sheet – LTL 6 million; 3) average annual number of pay-roll workers during the reporting financial year – 15 persons.
88. The provision of paragraph 1 of this Article allowing to draw up abridged financial reports and not to draw up a cash flow statement shall not apply where at least two indicators of an entity on the last day of the financial year exceed the limits specified in that paragraph for two consecutive financial years, including the reporting financial year.
89. Paragraph 1 of this Article shall not apply with respect to public interest entities.
90. Net turnover shall comprise the amounts derived from the sale of products and the provision of services during the reporting financial year after deduction of the amounts of the sale of returned goods, discounts and sales rebates.
91. The average annual number of pay-roll workers shall be calculated in accordance with the procedure set forth by the Government of the Republic of Lithuania or an institution authorised by it.
92. The requirements for abridged financial reports shall be set by Business Accounting Standards. CHAPTER FIVE ANNUAL REPORT Article
93. Annual Report
94. Public limited liability companies, private limited liability companies, general partnerships and limited partnerships all participants whereof are public limited liability companies or private limited liability companies must draw up the annual report in addition to annual financial reports.
95. The annual report must include: 1) a fair review of an entity’s position, the performance and development of the entity’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; 3) references to and additional explanations of the data presented in annual financial report; 4) the number of all the shares acquired by the entity and the entity’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; 7) reasons for acquiring the entity’s own shares during the reporting period; 8) information about the entity’s branches and representative offices; 9) the important events which have occurred since the end of the financial year; 10) the entity’s operating plans and forecasts; 11) information about activities of the entity in the field of research and development; 12) where the entity uses financial instruments and where this is of importance for the evaluation of the entity’s assets, equity capital, liabilities, financial position and performance, the entity shall disclose financial risk management objectives, its policy for hedging major types of forecasted transactions for which hedge accounting is used, and the entity’s exposure to price risk, credit risk, liquidity risk and cash flow risk.
96. In respect of the entities whose securities are admitted on 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 management and the medium of its (their) publication and/or reference to the entire required information published about the entity’s management practice; 2) in the event of derogation from provisions of the applied code (codes) of corporate management and/or a failure to comply therewith, those provisions and the reasons for derogating from and/or non 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 entity shall be described; 4) information about the major blocks of shares managed either directly or indirectly; 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 entity’s articles of association; 8) information about powers of members of the board; 9) the sphere of competence of the general meeting of shareholders, rights of shareholders and exercise thereof, unless this information has been provided for by laws; 10) composition of managing and supervisory bodies and committees thereof, their fields of activities and those of the head of the entity.
97. The annual report may be subject to additional requirements set by the laws and other legal acts regulating pursuit of activities of entities or an entity’s articles of association.
98. The entities indicated in paragraph 1 of Article 24 of this Law, with the exception of public interest entities, shall be allowed not to draw up the annual report, but the information specified in subparagraphs 4, 5, 6 and 7 of paragraph 2 of this Article must be disclosed in the notes on their accounts. CHAPTER SIX STORAGE OF FINANCIAL REPORTS AND THE ANNUAL REPORT, RESPONSIBILITY FOR THEIR DRAWING UP AND SUBMISSION TO THE LEGAL ENTITIES REGISTER Article
99. Procedure for Storing Financial Reports and the Annual Report The procedure for storing financial reports and the annual report shall be set forth by the Republic of Lithuania Law on Documents and Archives. Article
100. Responsibility for the Drawing Up and Submission of Financial Reports and the Annual Report to the Legal Entities Register The responsibility for the drawing up of an entity’s financial reports and the annual report and submission thereof to the Legal Entities Register shall rest with the head of the entity and members of managing 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 managing and supervisory bodies. The head of an entity and members of managing and supervisory bodies who fail to perform, or perform inappropriately, the duties related to the drawing up and submission of the entity’s financial reports and the annual report to the Legal Entities Register according to the sphere of competence assigned by laws respectively to the heard and managing and supervisory bodies must compensate for the entire incurred damage to the entity and/or other persons. I promulgate this Law passed by the Seimas of the Republic of Lithuania. PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS Annex to Republic of Lithuania Law on Financial Statements of Entities EU LEGAL ACTS IMPLEMENTED THEREBY
101. Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54