Financial year end
Section 287 of the Act outlines that the first financial year of a company, beginning from its date of incorporation, can be no longer than eighteen months. This was also the case under previous legislation however, Section 287 has introduced for the first time into company law, set rules regarding the alternation of the financial year end.
Each subsequent financial year end begins on the next immediate day after its first financial year end and continues for no longer than twelve months (or for a period as the directors may determine provided that period is not more than seven days shorter or longer than twelve months).
Alternation of financial year end
A company may alter its financial year end date or its previous financial year end date but may only do so once every five years unless:
- that notice has the effect of aligning the financial year end date of the company with a subsidiary undertaking or holding undertaking of another EEA entity; or
- the company is being wound up; or
- the Director Of Corporate Enforcement, on application to him/her, directs that it shall not apply.
An alternation of the financial year end date can be accomplished by submitting to the Registrar a notice in the prescribed form (Form B83). The ‘new’ financial year end date is only valid if it does not result in a financial period greater than eighteen months. The aforementioned notice, when it involves an alternation of the previous financial year end date, is not valid if it is not submitted before the period for delivering to the Registrar financial statements and reports for that previous financial year has expired.
Financial year end dates of subsidiaries
Section 288(3) requires, except where there are substantial reasons, that the financial year end date of a holding company and each of its subsidiary undertakings included in the consolidated financial statements are aligned. Where this is not the case, the reasons must be disclosed in the notes to the financial statements of the company.
Schedule 4, paragraph 3 to the Act outlines the accounting treatment for preparing the group financial statements where the financial year end of the subsidiary undertaking does not coincide with the financial year end of the holding company. In this instance, the group financial statements should incorporate the subsidiary’s financial information from its financial statements from its last ending financial year before that of the holding company’s provided it ended no more than three months before the financial year end date of the holding company. If it ended more than three months before that of the holding company’s, then the financial information must be drawn up from interim financial statements of the subsidiary undertaking as at the end of the holding company’s financial year.
Annual return date as it relates to date of incorporation and financial year end
As laid out in Section 343, a company must deliver to the Registrar, not later than 28 days after its Annual Return Date (ARD), its annual return. If a company was in existence before the commencement of the Act (i.e. prior to 1 June 2015), then its ARD is its existing ARD. If a company is newly formed, after 1 June 2015, then its ARD is six months after its date of incorporation and each subsequent ARD shall be the anniversary of this date. The date to which the financial statements that are annexed to the annual return are made up to cannot predate the ARD by more than nine months.
CA 2014 summary of changes – financial year end:
• Whilst no fundamental difference to what previously existed, the rules regarding financial year ends and their alteration have been set out in law for the first time
• A company can only change its financial year end once every five years by submission to the Registrar