Annual Accounts vs. Bookkeeping
Bookkeeping is the ongoing year-round process: recording transactions, reconciling bank accounts, processing invoices, filing VAT returns, and managing payroll. Annual accounts preparation is the discrete year-end project that transforms 12 months of bookkeeping records into audited financial statements ready for shareholder approval.
| Service | Frequency | Output | Deadline |
|---|---|---|---|
| Bookkeeping | Ongoing (monthly/quarterly) | Transaction records, VAT returns, payroll summaries | VAT: 60 days after period end |
| Annual accounts preparation | Once per year | Balance sheet, P&L, notes (+ cash flow / management report for large entities) | AGM approval within 6 months of FY end |
| Tax return filing | Once per year | Corporate income tax return | 6-9 months after FY end (cantonal deadline) |
What Financial Statements Does a Swiss AG or GmbH Need?
All Companies: Balance Sheet, Income Statement, Notes
Every Swiss AG and GmbH must prepare, as a minimum (OR Art. 958):
- Balance sheet (Bilanz): Assets, liabilities, and equity as at year-end
- Income statement (Erfolgsrechnung): Revenue and expenses for the year, either in production cost (Gesamtkostenmethode) or sales cost format (Umsatzkostenmethode)
- Notes (Anhang): Accounting policies, related-party transactions, contingent liabilities, details of long-term debt, and other required disclosures under OR Art. 959c
Large Entities: Cash Flow Statement and Management Report
Entities that exceed two of the three large-entity thresholds in two consecutive years must additionally prepare:
- Cash flow statement (Geldflussrechnung): Operating, investing, and financing cash flows; either the direct or indirect method is permitted
- Management report (Lagebericht): A narrative review of the business, key risks, performance, and outlook
- Recognised accounting standard (OR Art. 962): Swiss GAAP FER, IFRS, IFRS for SMEs, US GAAP, or IPSAS
| Threshold | Criterion | Consequence if exceeded (2 of 3, 2 consecutive years) |
|---|---|---|
| Balance sheet total | > CHF 20 million | Cash flow statement + management report + recognised standard mandatory (OR Art. 961-963) |
| Annual revenue | > CHF 40 million | |
| Full-time equivalent employees | > 250 |
Swiss Accounting Standards
| Standard | Who applies it | Relative complexity |
|---|---|---|
| Swiss CO (OR) basic standard | All AG/GmbH not required to apply a recognised standard | Low (minimum disclosure) |
| Swiss GAAP FER | Large entities (mandatory); mid-sized (voluntary) | Medium (true-and-fair, proportionate) |
| IFRS for SMEs | Mid-market companies seeking international comparability | Medium-high |
| IFRS (full) | Listed entities; foreign-owned subsidiaries required by parent group | High |
| US GAAP | Swiss subsidiaries of US-listed groups | High |
Audit Requirements
Ordinary Audit (OR Art. 727)
Required for large entities (exceeding two of the three large-entity thresholds in two consecutive years) and publicly listed companies. Conducted by a state-supervised auditor (FAOA state-supervised / zugelassener Revisionsexperte). The ordinary audit involves: assessment of internal controls, substantive testing of material balances, and issuance of an audit report to the AGM.
Limited Audit (OR Art. 727a)
The default audit requirement for all AG and GmbH not subject to the ordinary audit. Conducted by an FAOA-registered auditor (Zugelassener Revisor). The limited audit involves: analytical procedures (ratio analysis, trend analysis), inquiries with management, spot-checks of selected items, and issuance of a limited assurance report. It provides negative assurance ("nothing has come to our attention that...") rather than the positive assurance of an ordinary audit.
Opting Out of the Limited Audit
Under OR Art. 727a para. 2, a Swiss AG or GmbH may waive the limited audit if two conditions are simultaneously met:
- The company has fewer than 10 full-time equivalent employees on annual average
- All shareholders unanimously consent in writing to the waiver
| Audit type | Trigger | Auditor requirement | Approx. annual cost |
|---|---|---|---|
| Ordinary audit | Large entity (2 of 3 thresholds); listed company | FAOA state-supervised auditor | CHF 15,000-60,000+ |
| Limited audit | All AG/GmbH not meeting large-entity thresholds (unless opted out) | FAOA-registered auditor | CHF 3,000-10,000 |
| Opting-out (waiver) | <10 FTE + unanimous shareholder consent + resolution before year start | No auditor required | - |
The Annual Accounts Workflow (8 Steps)
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1
Year-end closing entries
Post year-end adjustments: accruals, prepayments, depreciation, inventory write-offs, provisions, and foreign currency revaluation. Reconcile all balance sheet accounts to source documents.
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2
Draft financial statements
Prepare draft balance sheet and income statement from the trial balance. For large entities, also draft the cash flow statement and management report.
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3
Tax provision calculation
Calculate the current and deferred tax provision. Prepare the tax reconciliation note. For cantonal CIT, apply the effective rate applicable to the company's canton, taking account of any tax incentives (patent box, R&D super-deduction).
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4
Notes preparation
Draft the statutory notes disclosures: accounting policies, related-party transactions, contingent liabilities, maturity profile of long-term debt, and any other disclosures required by OR Art. 959c or the applicable accounting standard.
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5
Audit liaison (limited or ordinary)
Provide the auditor with the draft financial statements, trial balance, and supporting schedules. Respond to auditor queries. For limited audits: typically 1-3 weeks; for ordinary audits: 4-8 weeks.
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6
Board approval
The board of directors approves the final audited financial statements and the proposed appropriation of profit (dividend or carry-forward). The board signs the accounts.
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7
AGM approval (within 6 months of FY end)
The annual general meeting (AGM) formally approves the financial statements, the auditor's report, and the appropriation of profit. The AGM minutes are signed and retained with the annual accounts documentation.
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8
Tax return filing and 10-year retention
File the corporate income tax return with the cantonal tax authority (deadline 6-9 months after FY end; extension typically available on request). Archive the accounts and all supporting documents for the 10-year statutory retention period (OR Art. 958f).
Common Audit Findings and Risk Areas
Certain areas consistently attract auditor attention in Swiss AG and GmbH audits:
- BVG pension underfunding: If the company's pension fund (Pensionskasse) is underfunded, OR Art. 959b requires disclosure of the economic obligation. Auditors check whether the company has adequately assessed and disclosed any pension liability.
- Related-party transactions not at arm's length: Intercompany service charges, loans, and royalties between the company and its shareholders or related entities must be at market rates. Non-arm's-length transactions can be reclassified as hidden dividends subject to 35% withholding tax.
- Revenue recognition: Long-term contracts, subscription revenue, and deferred income require careful cut-off analysis.
- Electronic records compliance (OR Art. 958f): Digitally stored accounting records must be reproducible, authenticated, and integrity-protected for the full 10-year period. Auditors increasingly verify digital archiving practices.
Cost Ranges (2026)
| Company size | Annual accounts preparation (est.) | Limited audit (est.) | Ordinary audit (est.) |
|---|---|---|---|
| Micro (revenue < CHF 500K; <10 FTE) | CHF 1,500-4,000 | CHF 2,000-5,000 | N/A (limited audit applies) |
| Small (revenue CHF 500K-5M) | CHF 3,000-8,000 | CHF 3,500-8,000 | N/A (limited audit applies) |
| Medium (revenue CHF 5M-40M) | CHF 8,000-20,000 | CHF 6,000-12,000 | CHF 15,000-35,000 (if large) |
| Large entity (2 of 3 thresholds exceeded) | CHF 15,000-40,000+ | N/A (ordinary applies) | CHF 25,000-80,000+ |
Frequently Asked Questions
What financial statements must a Swiss AG prepare?
Every Swiss AG must prepare: balance sheet, income statement, and notes. Large entities (2 of 3 thresholds: balance sheet >CHF 20M, revenue >CHF 40M, >250 FTE) must additionally prepare a cash flow statement and management report, and apply a recognised accounting standard (Swiss GAAP FER, IFRS, IFRS for SMEs, or US GAAP).
When must annual accounts be approved by the AGM?
Within six months of the end of the financial year (OR Art. 698-699). For a 31 December year-end, the AGM must be held by 30 June. For a GmbH, the same six-month deadline applies (OR Art. 804).
What is the difference between an ordinary and a limited audit in Switzerland?
An ordinary audit (OR Art. 727) is for large entities and listed companies; conducted by a state-supervised FAOA auditor with comprehensive substantive testing and positive assurance. A limited audit (OR Art. 727a) is for smaller companies; conducted by a registered FAOA auditor with analytical procedures, inquiries, and negative assurance. The limited audit is significantly cheaper and faster.
Can a Swiss company opt out of the limited audit?
Yes, under OR Art. 727a para. 2, if: (1) fewer than 10 full-time equivalent employees on annual average, and (2) all shareholders unanimously consent in writing. From 2025, the unanimous resolution must be passed before the start of the financial year it applies to -- no retroactive waivers are permitted.
What changed about audit opting-out in 2025?
Retroactive opting-out is abolished since 1 January 2025. The unanimous shareholder resolution must now be passed before the financial year it covers begins. Shelf company buyers must document the opting-out resolution immediately upon acquisition if they wish to avoid the limited audit for the first full year.
What is Swiss GAAP FER and when is it required?
Swiss GAAP FER is the national accounting standard providing a true-and-fair view. It is mandatory for large entities (OR Art. 962) that do not apply IFRS, and widely adopted voluntarily by mid-sized companies. It is less complex and less expensive than full IFRS while providing significantly more disclosure than the basic OR minimum requirements.
Can a Swiss company keep its accounts in EUR or USD?
Yes, since the 2023 company law reform. Swiss AGs that have denominated their share capital in a foreign currency (EUR, USD, GBP, JPY, CNY) may prepare accounts in that currency. A CHF conversion note for share capital and statutory obligations is required.
How long must Swiss companies retain financial records?
10 years from the end of the financial year (OR Art. 958f). This covers books of account, vouchers, business correspondence, and audit reports. Electronic retention is permitted if records can be reproduced in readable form and their integrity is guaranteed throughout the retention period.