How can I show my reserves in the annual financial statement?
June 26, 2023 | 50,00 EUR | answered by Günther Schmidt
Dear tax consultant,
I am facing the challenge of correctly reporting my reserves in the annual financial statements and am unsure of how to proceed. The background is that in recent years I have generated profits and would like to set aside some of these profits as reserves for difficult times or future investments.
Currently, the situation is such that I have not separately reported the reserves, but rather consider them as part of the equity. However, I wonder if it would be beneficial to separately report the reserves in order to have a better overview of my financial situation and to transparently present them to potential investors or banks.
My concerns lie in the fact that I am not sure how to correctly report the reserves in the annual financial statements in order to comply with legal requirements and to create a meaningful balance sheet. I want to ensure that my reserves are appropriately represented and that I do not make any errors that could lead to tax or legal issues.
Therefore, my question to you is: How can I best report my reserves in the annual financial statements to create a transparent and accurate balance sheet? What are the options for separately reporting reserves, and what tax implications could this have? I would greatly appreciate your expert assistance in this matter.
Sincerely,
Eva Lippert
Dear Mrs. Lippert,
Thank you for your question regarding the correct disclosure of reserves in the annual financial statements. It is important that you consider transparently presenting your financial situation and providing reliable information to potential investors or banks.
There are various ways in which you can disclose your reserves in the annual financial statements. Firstly, it is important to know that reserves are considered part of equity and therefore should generally be disclosed in equity. You mentioned that you have not separately disclosed reserves but rather consider them as part of equity. This is permissible and in line with legal requirements.
However, if you are considering a separate disclosure of reserves, you can do so by labeling them as "profit reserves" or "special items with reserve share," for example. These can then be disclosed separately in the balance sheet under equity to provide a clearer presentation.
When disclosing reserves in the annual financial statements, it is important to consider the tax implications. Reserves are generally tax-neutral and do not have direct effects on the amount of taxes to be paid. However, there may be tax consequences if you dissolve or use reserves, for example. In this case, reserves may lead to taxable profits.
To ensure that you disclose your reserves correctly and avoid tax issues, I recommend seeking assistance from an experienced tax advisor. A tax advisor can help you appropriately present reserves in your annual financial statements and minimize tax risks.
I hope this information has been helpful to you and I am available for further questions.
Best regards,
Günther Schmidt
