Financial reporting and audit for Swiss companies

For any company registered in Switzerland, bookkeeping, preparation of financial statements, and, in some cases, conducting an audit are mandatory. Regardless of the size of the business – whether it is a startup, a small enterprise, or a holding structure – every company must comply with the statutory reporting rules. Compliance with these rules ensures transparency of the company’s activities, strengthens investor and client trust, and meets the high standards of corporate governance in the country.

In this article, we will take a detailed look at the differences between the Annual Report and Financial Statements, analyze the current Swiss accounting standards and regulatory framework, and clarify when exactly an audit becomes mandatory.

What is the difference between an Annual Report and Financial Statements?

In order to understand the Swiss accounting system, it is important to distinguish between a company’s annual report and its financial statements. The annual report is a broader concept that covers the full package of the company’s financial documents for the year, including the balance sheet, profit and loss statement, notes, and, for larger companies, also the cash flow statement and management report. At the same time, the financial statements are a component of the annual report and represent its core part.
This distinction is also specified by the legislator in Article 958 of the Swiss Code of Obligations, which regulates the basics of financial reporting in Switzerland.

What are the accounting standards in Switzerland for preparing financial statements?

The reporting requirements of Swiss companies are governed by the provisions of the Swiss Code of Obligations, in particular Articles 957–963b. The law requires that all legal entities subject to its scope prepare financial documentation in accordance with these provisions.
Every company is obliged to file tax returns at both federal and cantonal levels for the calculation of profit, depreciation, deductions, and tax. At the same time, the financial report is general and prepared once a year, reflecting the company’s overall activity.

The financial year usually coincides with the calendar year (January 1 to December 31), however, a company may choose a different reporting period. For example, the first accounting year may be shorter or longer than 12 months if the company begins operations not at the start of the calendar year.

In addition to the basic requirements of the Swiss Code of Obligations, certain companies must report under international or industry-specific financial reporting standards. The most common are:

• Swiss GAAP FER – for companies wishing for a more detailed representation of their financial position;
• IFRS or IFRS for SMEs – for multinational companies or those attracting external financing;
• US GAAP – usually for companies with American investors;
• IPSAS – for the public sector or related structures.

What must the financial statements of a Swiss company include?

The financial statements of any Swiss company must include the following elements:

• Balance Sheet – shows the company’s assets, liabilities, and equity as of the reporting date;
• Profit and Loss Statement – reflects the company’s income, expenses, and financial results for the reporting period;
• Notes to the Financial Statements – required to explain individual items of the balance sheet and income statement;
• Cash Flow Statement – shows cash inflows and outflows broken down by operating, investing, and financing activities;
• Auditor’s Report (if an audit is mandatory).

In addition, it is important to remember that:

• Reporting must be prepared in Swiss francs. If another currency is used, the equivalent in CHF and the exchange rate must be disclosed;
• Reporting must be prepared in one of Switzerland’s official languages – German, French, or Italian. English is also permitted;
• Signed reports must be retained for at least 10 years.

What are the deadlines for filing financial statements?

According to Article 958 of the Swiss Code of Obligations, a company’s annual report, which includes financial statements, must be prepared within six months after the end of the financial year. This deadline is mandatory for both small businesses and large companies and is connected with the requirement to hold the annual shareholders’ meeting within the same period. Failure to comply may result in legal liability and risks from supervisory authorities.

When is an audit mandatory?

Swiss legislation divides audits into three main types:

• Ordinary Audit (full audit),
• Limited Audit,
• Possibility of Opting-out of audit under certain conditions.

Each type of audit has clearly defined application criteria, depending on the company’s size, legal form, number of employees, as well as shareholders’ preferences.

Ordinary Audit (Full Audit)

It is mandatory for companies that meet at least two of the following three criteria for two consecutive financial years:

• The company’s total balance sheet exceeds CHF 20 million;
• Annual turnover (revenue) exceeds CHF 40 million;
• The average number of employees is more than 250.

An ordinary audit is also required for:

• Public companies (whose securities are listed on the stock exchange);
• Companies preparing consolidated accounts (a group of companies);
• Enterprises where minority shareholders holding at least 10% of capital officially demand a full audit;
• Companies for which this is stipulated in the articles of association.

The auditor’s powers within an ordinary audit include a deep review not only of the financial statements but also of the internal control system, risk management procedures, and compliance with accounting standards.

Limited Audit

This is a simplified form of audit applied to most small and medium-sized Swiss companies.
Companies that do not reach the thresholds of an ordinary audit are subject to a limited audit.
A limited audit involves:

• A smaller scope of verification;
• The auditor checks the main risks but does not conduct an in-depth analysis of internal control;
• The auditor’s report is shorter and does not contain an opinion of full accuracy, but only a confirmation of the absence of significant violations.

Opting-out of Audit

Swiss law provides the possibility of a complete waiver of mandatory audit for certain companies. This right is regulated by Article 727a, paragraph 2 of the Swiss Code of Obligations.

To exercise the right to opt out of an audit, a company must meet the following criteria:

• The number of company employees does not exceed 10 full-time employees on average during the year;
• All shareholders or participants unanimously agree to opt out of the audit. Opting-out cannot be applied if even one shareholder disagrees;
• The waiver is documented in the resolution of the general meeting.

This rule is beneficial for small businesses seeking to reduce administrative costs and that have no external audit requirements (e.g., from banks or investors).
It is important to note that the opting-out decision can also be revoked at any time if the company’s structure or shareholders’ requirements change.

Financial reporting of Swiss companies must comply not only with local legislative requirements but also with international reporting standards, especially in cases of international operations. Audit, in turn, is an important tool for control and confirmation of the reliability of such reporting.

If you need assistance with preparing financial statements or undergoing an audit in Switzerland, contact the Azola Legal Services team. We will ensure full compliance with legal requirements and international standards.