Bilingual Financial Reports in Colombia
The bilingual financial reports in Colombia and its tributary laws are quite different from those practiced around the world. However, the basic principles of accounting are the same. The government of Colombia has worked towards making the accounting processes English proficient through bilingual balance sheets and other financial reports. However, the whole process is still much more than just translating keywords and titles of the reports.
Corporations are required to file their taxes every month. The dates are administered by the last two digits of your corporation’s identification number. But the dates keep changing as well. In addition, it takes time to understand all the ins and outs of the accounting systems and the requirements of financial reports in Colombia. Therefore, it is best to hire a proficient accountant who complies with the high standards of the country’s accounting needs. Below are some basic requirements:
The reporting requirements and rules in Colombia are set by different Colombian government agencies, Tax and Customs Administration, Superintendency of Banks, Superintendency of Securities, and Superintendency of Corporations. There are GAAP (Generally Accepted Accounting Principle) in Colombia are contained in decrees. For all the organizations and corporations that engage in income-generating activities, it is mandatory to follow GAAP while releasing their financial reports. Whatever the tax requirements may be, the financial reports in Colombia are expected to give out an accurate and true picture of the monetary and financial status of the business.
The Unique Plan of Accounts renders it compulsory for companies to record their transactions and operations in specific and standard formats. However, Colombian Corporate Laws limit businesses to maintaining their records in Colombian currency. A variation of the ICP (Consumer Price Index), the fiscal year’s adjustment percentage should be applied for adjusting the net worth and the face value of non-monetary liabilities and non-monetary assets for devaluation and inflation.
All the corporations working in the financial sector and all businesses that issue liabilities or list their shares on the stock exchange are required to publish their bilingual balance sheets and financial reports in a local newspaper.
Accounting Standards and Principles in Colombia
IFRS (International Financial Reporting Standards) or NIFF (Normas Internacionales de Informacion Financiera) are the accounting standards effective in Colombia. If your business is not compliant with them, you can be fined up to $45,000. The branches and subsidiaries operating in Colombia often release two different sets of financial reports. One is prepared adhering to the headquarter country’s accounting principles. The other is prepared for local legal purposes and Colombian shareholders and is compliant with GAAP.
Corporate income tax purposes do not require two separate sets of financial reports. Instead, a tax computation schedule features the adjustments to the financial reports used to arrive at the gross profit. Banks and certain other financial institutions are required to file financial reports every month. In contrast, other companies must prepare them once a year.
The law of Colombia does not allow for double taxation. Different Colombian legal and accounting firms interpret allowing US deductions for the money earned in the US differently. The difference of tax percentages not paid in one country is required to be paid in another. All companies and businesses have their own unique and specific set of circumstances. Therefore, a qualified professional should be hired to study them before proceeding with the process.
Tax reports must be filed every month, and there are annual, quarterly, and monthly cash flow reports. Employees receiving benefits are to be given monthly reports. Even companies that are just starting up or are inactive need to file certain reports every quarter to prevent the risk of getting fined by the DIAN.
The basic financial information has to explain certain items in the financial reports and the company’s accounting policies. Other than that, it contains:
- The statement of cash flows
- The statement of changes in the financial position
- The statement of changes in shareholder equity
- The statement of retained earnings
- The statement of income
- The balance sheet
All expenses incurred for an asset to start functioning should be included in its cost. In addition, any interest incurred on debts directly related to the asset should be capitalized until it is ready to be used.
The circumstances that surround a leasing transaction should determine its contract’s classification. There are only a few cases where you can classify a lease as an operational one. Otherwise, as a rule, it should be classified in the records as a capital lease. In rare cases, legal requirements must be complied with.
Inventory valuation is usually done using FIFO, LIFO, or weighted-average methods. In contrast, retail system methods, periodic inventory systems, and perpetual inventory systems are used to determine the cost of sales and the ending inventory. If adjustments are made about current situations, the standard cost method can be used for financial reporting purposes. However, the standard cost method is not acceptable by tax law to calculate the cost of sales.
When dividends are declared at the general shareholder’s assembly about the financial reports, they are accounted as a liability. This is because accounting for declared dividends requires a decrease of retained earnings and the inclusion of dividends in current liabilities.
Consolidated Financial Reports in Colombia
The holding or parent company must prepare and issue financial reports containing the cash flows, the change in net worth, the result of operations, the financial position of the parent company, and all its subsidiaries. In addition, the unconsolidated investments in the subsidiary companies also need to be recorded through the equity method.
Lastly, the statement of income should include and disclose all unusual items. They include non-recurrent gains or losses incurred by the business through transactions that are not a part of its usual activities. The financial reports in Colombia that require public view should be in English as well as Spanish. Therefore, bilingual balance sheets are common in the country.