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Annual Report on Financial Statement Reporting (Financial Year 2018)

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KCRF 2018

Annual Report on Financial Statement Reporting (financial year 2018) Kosovo Council for Financial Reporting (KCFR)

Republika e KosovësRepublika Kosova – Republic of Kosovo

Qeveria e Kosovës – Vlada Kosova – Government of Kosova

Ministry of Finance Kosovo Council for Financial Reporting (KCRF)


Content:I. Introduction...........................................................................1

II. Basic indicators for large enterprises in Kosovo......................2

II.1. Assets..................................................................................................................................2

II.2. Revenues (turnover)...................................................................................................3

II.3. Profit, Loss and Tax....................................................................................................3

II.4. Registration form of large trading companies in Kosovo and division into sectors..............................................................................................................6

III. Basic indicators of audit reports of large enterprises in Kosovo.................................................................................................7

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I. Hyrje

Based on the Law on Accounting, Financial Reporting and Auditing No. 04/L-014, the financial statements of large trading companies in Kosovo should be audited in accordance with international auditing standards, by audit firms licensed by KCFR. At the same time pursuant to Article 11 of the Law, large trading companies are obliged to submit and publish financial statements to the Kosovo Financial Reporting Council (KCFR). The financial statements of large trading companies should be prepared in accordance with International Financial Reporting Standards (IFRS/s) and International Accounting Standards (IAS/s). The financial statements submitted to the KCFR are an integral part of the register of annual financial statements at the country level. The annual register of financial statements serves as a central source of information on the activity of large trading companies in Kosovo about their financial position and performance. It should be stressed that not all companies licensed by the Central Bank of Kosovo are subject to the current applicable Law on Accounting, Financial Reporting and Auditing.

The main Purpose of establishing an annual register of financial statements, is increasing of financial transparency of large trading companies which have a considerable influence on country’s economy. Thus, establishing such a register is a step forward towards harmonization of Kosovo’s legislation with the one of European Union countries. The time limit for the delivery of financial statements of large trading companies is the date of 30th April of following year. In regard to large trading companies that are obliged to prepare consolidated financial statements, the time limit for the delivery of these statements if 30th June of following year.

The number of large trading companies which have submitted the financial statements to the KCFR for the financial year that ends on 31 December 2017 is 361, excluding banks and insurance companies which aren’t subject of the Law on Accounting, Financial Reporting and Auditing, which have submitted the financial statements for the financial year that ends on 31 December 2018 is 361, (in total are submitted 378 financial reports including here even some economic entities which belongs to the category of medium trading companies), excluding banks and insurance companies which aren’t subject of the Law on Accounting, Financial Reporting and Auditing.

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II. Basic indicators of large enterprises in Kosovo

Table 1: Financial results of Trading Companies in Kosovo (values in ‘000)

Description 2017 2018 Change

(%)Turnover (revenues) € 4,862,613 € 5,345,574 10%Assets € 5,039,552 € 5,551,683 10%Profit before Tax (PBT) € 283,684 € 315,493 11%Loss before Tax -€ 50,348 -€ 84,116 67%Tax on profit € 31,592 € 37,562 19%Profit after Tax € 251,928 € 282,108 12%Loss after Tax -€ 58 761 -€ 82,032 40%Employees number 51 62 22%

II.1. Assets Based on table 1 and chart 1 data, the assets value of large trading

companies in 2017 was 5.039 billion €, whereas in 2018 this category of balance sheet amounted to 5.551 billion €. This change means that the assets of all large trading companies in Kosovo are increased for 10% compared to previous year.

Chart 1: Assets progress of large trading companies in 2017/2018 (values in ‘000€)

2017 20184,700,0004,800,0004,900,0005,000,0005,100,0005,200,0005,300,0005,400,0005,500,0005,600,000

5,039,553

5,551,684

Assets17/18

Asetet 17/18


II.2. Revenues (turnover)

Based on table 1 and chart 2 data, in 2017, large trading companies in Kosovo have realized total revenues amounted 4.862 billion €. In 2018 revenues amounted to 5.345 billion €, a value that compared to 2017 marked an increase of 10%. This means that large enterprises in Kosovo have shown positive performance in regard to the total of products sale or providing of service during 2018.

Chart 2: Revenues progress of large trading companies in 2017/2018(values in ‘000€)

2017 20184,600,0004,700,0004,800,0004,900,0005,000,0005,100,0005,200,0005,300,0005,400,000

4,862,614

5,345,575

Revenues 17/18

Të hyrat 17/18

II.3. Profit, Loss and Tax Based on table 1 and chart 3 data, for this category of trading

companies, Profit before Tax (PbT), in 2017 was 283.684 million €, whereas in 2018 Profit before Tax (PbT) was 315.493 million €, marking an increase by 13% compared to previous year. This means that large enterprises had less operation and other costs during 2018 compared to 2017, and as a result of this PbT marked an increase.

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Chart 3: Profit before Tax of large trading companies in 2017/2018 (values in ‘000€)

2017 2018260,000

270,000

280,000

290,000

300,000

310,000

320,000

283,684

315,493

Profit before Tax 17/18

Fitimi para-tatimit 17/18

Based on table 1 and chart 4 data, for this category of trading companies, Profit after Tax or Net Profit in 2017 amounted to 254.928 million €, whereas in 2018 Profit after Tax amounted to 282.108 million €, marking an increase by 12%. This again might be as consequence of the decrease of costs level of this category of enterprises during 2018.


Chart 4: Profit after Tax of large trading companies in the year 2017/2018 (values in '000 €)

2017 2018235,000

240,000

245,000

250,000

255,000

260,000

265,000

270,000

275,000

280,000

285,000

251,928

282,109

Profit after-tax 17/18

Fitimi pas-tatimit 17/18

Profit tax for large trading companies for the year 2018 was € 37,562 million, while profit tax for 2017 was € 31,592 million.

Chart 5: Profit tax of large trading companies for the years 2017/2018 (values in '000 €)

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2017 201828,00029,00030,00031,00032,00033,00034,00035,00036,00037,00038,000

31,593

37,562

Profit Tax 17/18

Tatimi ne Fitim 17/18

It is also worth to mention the important role of large trade companies in the employment market in Kosovo (Chart 6), by employing about 62 thousand employees in 2018, while in 2017, the number of employees was about 51 thousand. The number of employees increased by 22% during 2018.

Chart 6: Number of employees 2017/2018 (values in ‘000)

2017 20180

10,000

20,000

30,000

40,000

50,000

60,000

70,000

51,20062,412

Employees 17/18

Të punësuarit 17/18


II.4. Forms of registration of large trading companies in Kosovo and division in sectors

Based on the data presented in Table 2, the most common type of organization of large trading companies in Kosovo is that of 'limited liability companies' representing 79% of all large trade companies that have submitted financial statements in the KCFR. Whereas the rarest is the '1%' partnership, followed by the 10% 'joint stock' type and the 10.5% 'individual business' type.

Table 2: Forms of organizing the large trade companies for the year 2018

Description 2018Percentage

Individual Business 3810.5%

Partnership 2 1%

Limited Liability Company 284 79%

Joint Stock Company 3710.0%

TOTAL 361 100%

Based on the data presented in Table 3, 93.1% of all large trading companies in Kosovo that have submitted financial statements to KCFR are of private sector, while only 6.9% are of public sector. This statistic shows that the private sector has an absolute dominance in the market of the category of large trade companies in Kosovo.

Table 3: Division based on sectors

Description 2018

Percentage

Private Sector 336 93.1%Public Sector 25 6.9%TOTAL 361 100%

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Based on the data presented in Table 4, 53.19% of all large trading companies in Kosovo that submitted financial statements to KCFR are companies dealing with trade, while only 28.80% of companies deal with manufacturing and 18% deal with the provision of services.

Table 4: Division based on industry

Description 2018

Percentage

Manufacturing 104 28.80%Trade 192 53.19%Services 65 18%TOTAL 361 100%

III. Basic indicators of audit reports of large trading companies in Kosovo

The following shows the results of the analysis of the type of audit firms that have audited large trading companies in Kosovo for the financial year 2018. Based on the summary data presented in Table 6, it is noted that in 2018 the domestic audit firms issued opinions on 241 large trade companies, ie 66.75% of all enterprises in this category. Meanwhile, foreign audit firms issued opinions on 113 large trade companies, i.e. 31.30% of all enterprises in this category. This statistic shows that licensed local audit firms have audited the vast majority of large trading companies in Kosovo. As can be seen from Table 5, 5 the companies have been audited by the NAO and 2 companies do not have an audit report.

Table 5: Type of audit firm

Description 2017 Percentag


e Foreign firm 113 31.30%

Domestic firm 241 66.75%NAO1 5 1.38%

Do not have audit report 2 2 0.55%

TOTALI 361 100%

Table 6, presents the results of the type of opinion analysis issued by the auditors. Based on the summary data in Table 6, it is noticed that in 2018 the number of unqualified opinions was 211 (58.4%), the number of qualified opinions was 137 (37.9%), the number of adverse opinions was five (1.38). %) and the number of disclaimers was five (1.38%). This statistic shows that about 60% of large companies in Kosovo had financial statements that were fully compliant with IFRS/IAS. Regarding the category of qualified opinions, it should be noted that the most common reasons that led to the qualification were: (i) failure to count stocks, (ii) valuation of real estate, plants and equipment, (iii) non-promotion of accounts, receivables, (iv) accrual liabilities, (v) deferred tax, etc.

Table 6: Type of provided opinion

Description 2018

Percentage

Unqualified 211 58.4%Qualified 137 37.9%

Adverse 5 1.38%Opinion Disclaimer 5 1.35%

The opinion is missing3 3 0.83% TOTAL 361 100%

It is worth to mention that seventeen Consolidated Financial Statements with audited reports were received in KFRC offices.The list of entities that have reported Consolidated Financial Statements attached to the audit reports are:

1. Kosovo Calik Limak Energy SH.A

1 National Audit Office – had audited 5 public enterprises who have submitted the reports as such by not respecting the Law on Accounting and Financial Reporting and Auditing no; 04/L-014.2 There is no audit report - two public enterprises have reported only the Annual Financial Statements without a report.3 The opinion is missing- two public enterprises do not have audit reports and one opinion is missing for one private enterprise.

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2. Cactttus3. Company 21 SH.P.K4. 3 P SH.P.K5. Marketing and Distribution SH.P.K. 6. Bedri Prishtina Group SH.P.K7. Kastrati Holding SH.P.K8. Ex Fis Sh.P.K.9. Pestova SH.P.K.10. Birra Peja & Subsidiary11. Ada Consulting Group LLC12. Proex SH.P.K. 13. CDI Kosovo SH.P.K.14. Kan SH.P.K. 15. Europrinty SH.P.k.16. Jaha Company17. Al Trade Holding SH.P.K.

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