Financial statements are official documents that certain companies must draw up and publish at set intervals.
Their purpose is to enable authorities to get a clear, accurate, and truthful picture of a business’s activities during a given financial period. The following entities must draw up financial statements in English:
- Companies listed on the stock exchange
- Companies with widespread financial instruments;
- Supervised banks and financial institutions;
- Companies that prepare consolidated financial statements or companies consolidated by parent companies.
Financial statements and the relevant terms
Financial statements provide an accurate snapshot of a company's balance sheet and financial statements. They are divided into three sections, each of which has a different purpose:
- Balance sheet
- Income statement
- Explanatory notes
The balance sheet provides an accurate picture of a company's financial and equity situation. Total assets include all movable and immovable property owned by a company, receivables from third parties, and the liquidity available to a company when drawing up the financial statements. Total liabilities include debts accrued by a company that it has not yet settled. The difference between the two – which can be positive or negative – is stated in the balance sheet.
Meanwhile, the income statement lists company costs and revenues. The difference between costs and revenue is referred to as the operating profit (if the difference is positive) or operating loss (if the difference is negative).
Finally, the explanatory notes provide additional information required to understand and analyse the information provided in the first two sections.
Financial statements must be approved within four months of the end of the financial year. Meanwhile, group companies have a maximum of 180 days to draw up consolidated financial statements.
After their financial statements are approved, companies have thirty days to file their financial statements with the companies registration office. These records and the company’s declarative value are then made public. If the financial statements are approved but not filed, they cannot be used to oppose third parties in legal proceedings.
Italian companies required to publish financial statements include:
- SPAs and SRLs
- SCPAs and SCPRs (Joint Stock Companies and Limited Liability Companies)
- Cooperative societies and consortia
- Consortia with external activities
- Mutual insurance companies
- EEIGs (European Economic Interest Groupings)
Translating financial statements: regulations
The process of globalisation in recent decades has led to a boom in trade relations between countries around the globe.
To facilitate and standardise relations between Member States, the European Union has created a regulatory corpus that applies the same accounting standards to all EU countries.
This is a constantly evolving process. Initially established in 1973, the rules for preparing financial statements are issued by the International Accounting Standards Board (IABS).
The International Accounting Standards underwent further modification in 2022 and are indicated with the abbreviation IFRS (International Financial Reporting Standards).
Many companies and financial entities operating in EU Member States, including Italian companies, have to comply with the international standards in force.
In particular, the following financial entities must draw up annual financial statements in compliance with international standards:
- Companies listed on the stock exchange
- Companies benefiting from widespread financial instruments
- Banks and other financial institutions subject to supervision
- Companies that prepare consolidated financial statements or those consolidated by parent companies.
As is always the case in the legal and judicial fields, the rules governing the preparation of financial statements are constantly changing. And they may be subject to further amendments in the coming years.
This means that companies need to be aware of the legislation and amendments if they are to draw up financial statements that comply with the regulations in force.
How to translate financial statements into English
Given that financial statements are drawn up for international use, they need to be published in English for use by trading partners and the financial authorities.
In addition, drawing up or translating balance sheets in English demonstrates a company's ability to operate profitably in international business and regulatory scenarios.
Companies must translate their financial statements into English using appropriate and up-to-date terms that comply with current legislation. We also recommend using British English. Of course, it follows that we recommend translating income statements and balance sheets into British English, too.
For these reasons, you should entrust the task to a translator specialised in financial translations. Doing so will ensure that all technical terms are used correctly and do not result in misunderstandings or, worse still, legal problems.
Why request financial translations?
You need to request financial translations whenever you need to translate financial documents concerning company activities.
Financial language is technical in nature. Financial terms are not commonly used and cannot be translated correctly without the right expertise.
Given that financial documents such as statements are usually formal requirements, you need to ensure professional translations are drawn up and filed correctly to avoid legal and economic repercussions, and potential sanctions.
At Eurotrad, our financial statement translations always comply with the international codes and standards in force at the time of translation.
At Eurotrad, we have managed a team of professionals specialising in translations for different business sectors for more than twenty years, including the financial sector. Send us the document you need to translate and request your free quote now.
Translators need to be familiar with concepts relating to the legal, industrial, social and production spheres to translate economic texts.
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