Karpeo · Business in Switzerland
Notes to annual accounts in Switzerland: requirements and an SME example
The notes explain what the balance sheet and income statement do not show clearly enough. They form part of a Swiss corporation’s or LLC’s annual accounts. Here are the disclosures to review and an example to help prepare notes suited to your business.
By Sarah Prieur · Swiss certified public accountant
Why the notes matter
The notes supplement and explain the balance sheet and income statement. They describe accounting policies, particular balances and commitments that are not immediately apparent from the figures.
Article 959c of the Swiss Code of Obligations (CO) provides the central requirements, supplemented by other legal provisions. A template must reflect the facts of the current year. The aim is useful information: short notes can be appropriate if all applicable disclosures are included.
Which businesses must prepare notes?
The annual accounts of a Swiss corporation (SA/AG) or limited liability company (Sàrl/GmbH) comprise the balance sheet, income statement and notes. Opting out of a limited audit does not remove this accounting obligation.
Article 959c paragraph 3 exempts sole proprietorships and partnerships from preparing notes if they are not subject to the financial reporting rules for larger undertakings. Additional information required by the minimum structure of the balance sheet or income statement must then appear directly in those statements.
Distinguish the type of bookkeeping required from the separate question of notes. Crossing the threshold for full accounts does not, by itself, remove this exemption for a sole proprietorship. See accounting for sole proprietorships and partnerships.
Associations, foundations and other entities should check their own regime: legal entities are not limited to corporations and LLCs.
Four main groups of information
Article 959c paragraph 1 groups the content into four areas:
| Area | What to explain | Practical example |
|---|---|---|
| Accounting policies not prescribed by law | Choices needed to understand the accounts | Valuation of work in progress |
| Details of particular items | Composition or explanation of significant balances | A material receivable or unusual balance |
| Net release of hidden reserves | The effect where the legal conditions are met | A material improvement in reported results through a net release |
| Other legally required information | Disclosures applicable to the entity and its circumstances | Contingent liabilities or subsequent events |
A general sentence saying the accounts comply with Swiss law does not replace company-specific explanations. Equally, copying every legal provision adds little value.
The hidden-reserve disclosure does not concern every isolated release. It concerns the relevant net amount of releases exceeding similar additions where this materially improves the economic result presented.
Article 959c: disclosures to check
Review the following and disclose them where applicable unless the information already appears directly in the balance sheet or income statement:
| Topic | What to check |
|---|---|
| Identity | Business name, legal form and registered office |
| Employees | Relevant annual average full-time-equivalent category: 10, 50 or 250 |
| Participations | Relevant entities, registered office, legal form, capital interest and voting rights |
| Own equity interests | Holdings, acquisitions, disposals and related conditions |
| Leases | Relevant remaining commitments that neither expire nor can be terminated within twelve months |
| Pension obligations | Amounts owed to occupational pension institutions |
| Security and guarantees | Security for third-party liabilities, pledged assets and retention-of-title arrangements |
| Contingent liabilities | Obligations meeting the legal disclosure criteria |
| Employee participation | Equity rights or options granted to governing bodies and employees |
| Unusual items | Explanations of extraordinary, non-recurring or prior-period items |
| After year-end | Significant events after the balance sheet date |
| Auditor | Reasons for early resignation or removal |
| Capital band | Capital increases and reductions carried out by the board within a capital band |
Other provisions require information on matters such as related parties, foreign currency, a departure from the going-concern basis and certain valuations. An old Article 959c checklist alone may therefore miss a required disclosure.
Illustrative notes for a small Swiss LLC
The following is a partial educational example for a fictional business. Do not copy the amounts or circumstances into your own accounts. Review all applicable disclosures separately.
| Topic | Illustrative wording or amount |
|---|---|
| Identity | Atelier Léman Sàrl, a limited liability company with its registered office in Geneva |
| Employees | The annual average number of full-time-equivalent employees does not exceed 10 |
| Fixed assets | Equipment is depreciated on a straight-line basis over its estimated useful life |
| Pension liabilities | CHF 3,200 at year-end, compared with CHF 2,800 in the previous year |
| Relevant lease commitments | Remaining commitment of CHF 18,000, compared with CHF 24,000 in the previous year |
| Guarantee for a third party | Guarantee of CHF 25,000, with the contract and relevant conditions described |
| Subsequent event | Description of a significant event after year-end and its effect where it can be estimated |
An employee working at 50% throughout the year represents 0.5 full-time equivalent. Two full-time employees and one half-time employee represent 2.5 FTE before adjusting for people joining or leaving during the year.
For leases, use the contract and payment schedule. Instalments paid during the year are not the same as the remaining commitment at year-end. Check the actual termination rights.
A statement of “none” must follow a check. Do not carry it forward automatically because the previous year’s template contained no guarantee or significant event. Likewise, the policy for depreciation must reflect the method actually applied.
Additional information for larger undertakings
Undertakings required by law to undergo an ordinary audit face additional requirements. The notes must, in particular, split long-term interest-bearing liabilities between maturities of one to five years and those beyond five years. They also disclose the auditor’s fees, distinguishing audit services from other services.
For companies assessed by size, an ordinary audit is generally required when two of three thresholds are exceeded in two successive financial years: CHF 20 million of assets, CHF 40 million of revenue and 250 full-time-equivalent employees on annual average.
Size is not the only trigger. Rules also concern publicly traded companies and entities required to prepare consolidated accounts.
Article 961d permits certain simplifications where financial statements or consolidated accounts under a recognised standard are available and the legal conditions are satisfied. This does not mean a group can freely omit all notes from individual statutory accounts. If considering Swiss GAAP FER reporting, assess the interaction explicitly.
Gather the information before closing
The ledger does not tell the accountant everything. A guarantee signed by management or an event after year-end may never appear on a bank statement.
Prepare a file containing:
- The current accounts and comparative information.
- Financing, lease and guarantee contracts.
- Participations held and capital transactions.
- Average staffing and any employee participation plans.
- Disputes, significant events and changes since the previous year.
During the annual close, reconcile every numerical note to supporting evidence and ensure that the notes agree with the balance sheet. Review the explanations with management: significant facts extend beyond what the software has recorded.
Frequently asked questions
Does an LLC without an auditor still need notes?
Yes. Opting out of a limited audit does not exempt an LLC from preparing annual accounts, including notes.
Does a sole proprietorship always need notes?
No. The exemption in Article 959c paragraph 3 applies if it is not subject to the reporting rules for larger undertakings. Required additional information must then appear in the balance sheet or income statement.
Should every legal disclosure be copied into the notes?
Review every applicable requirement, then provide information suited to the actual circumstances. Irrelevant headings and generic paragraphs do not replace necessary explanations.
Must pension fund liabilities be disclosed?
Yes. Article 959c requires this information if it is not already shown in the balance sheet or income statement. The amount must reflect the obligation at year-end.
Can last year’s notes be reused?
They can provide a starting point. Update amounts, review new contracts and events, and check applicable obligations. Changing only the date is insufficient.
Sources and references
About the author
Sarah Prieur
Sarah Prieur is a Swiss certified public accountant and a partner at Karpeo. She supports entrepreneurs, self-employed professionals and SMEs with accounting, tax and business decisions in Switzerland.
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