The entry into force of the Law for Strengthening Public Finance in Costa Rica at the end of 2018, brought with it a change in how the fiscal period was measured in the country.
As of 2020, it went to the same format of the calendar year, that is, it will go from January 1 to December 31. Before the Law, the fiscal period began on October 1 and ended on September 30 of the following year.
This change obliges companies and taxpayers to consider three additional months in the preparation of their Income Tax returns and financial statements, since due to the transition that takes place in 2020 the current fiscal period will consist of 15 months, and not the usual 12.
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Financial statements must be comparable with previous periods
According to Carlos Vargas, CEO of the firm TPC Group, the financial statements provide reliable and reasonable information about the financial situation, financial performance and cash flows of a company, to make economic decisions at a certain time.
This is why a very important aspect is that the financial statements are comparable with those of previous periods, as well as with those of other entities. In an atypical situation like the one that happens this year in Costa Rica, companies must report the period covered, specifying the reason for using a longer period, and the fact that the amounts presented in the financial statements are not totally comparable,” Vargas explained.
Additionally, companies must make changes in their accounting closing, going to close their financial statements from September 30 to December 31. “From the presentation point of view, in order to regularize the new accounting closings, the comparative financial statements must be presented; specifically financial statements as of September 30, 2019 (12-month period), financial statements as of December 31, 2020 (15-month period), and the comparative disclosure notes with the same dates”, indicated the expert.
Given this change in the period, the role of the audit also plays an important role, since the audit must be performed on the financial statements as of December 31, 2020, a new period for their presentation compared to the period ended on December 30, 2020.
Likewise, the following elements should be indicated in the audit opinion:
- The title of the financial statement as of December 31, 2020 and must indicate that it corresponds to a period of 15 months.
- The unmodified opinion must be based on the periods ended December 31, 2020.
- In ‘Other Business’, after the opinion, mention the reason for the irregularities of the current period (12/31/2020), and the reason for the change in the presentation dates and indicate that the periods presented are not comparable.
- Mention the Minutes of the Shareholders’ Meeting where such decision was approved.
“The responsibility of the auditor is to express an opinion on the financial statements in accordance with the International Financial Reporting Standards-ISA. The auditor will not modify his opinion, since they are prepared under the applicable accounting framework”, concluded the CEO of TPC Group.