Principles of Accounting and Financial Reporting in Switzerland: Find a Business Accountant for a Swiss Startup Company or SME

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Last update: 2 December 2023

Its financial position is a top priority for every company. This means that owners and CEOs must have at least basic Swiss accounting knowledge. But it doesn't mean they need to do the bookkeeping themselves.

We professionally outsource the accounting function of Swiss startups and established SME businesses and offer the following subscription plans:

Introduction to Accounting in Switzerland

In Switzerland, every company must engage in financial accounting ("Buchhaltung"), keep (digital or paperless) records of all its business transactions for a period of 10 years, and submit to its management within six months of the end of the previous year an annual report ("Jahresrechnung") consisting of the Swiss company's financial statements ("Geschäftsbericht") in the form of the balance sheet ("Bilanz"), the profit and loss statement ("Erfolgsrechnung") and the corresponding notes ("Anhang").

The annual report must be signed by the chairperson of the Swiss company's most senior management, in addition to the Swiss company's CFO, before being submitted together with the corporate tax declaration (here) to the cantonal tax authorities before 30 November of the subsequent calendar year at the very latest (example: canton of Zurich).

A current overview of the cantonal filing deadlines for the submission of tax returns by Swiss companies can be found under this link (here).

Accounting in Switzerland is carried out in Swiss francs (CHF) or in any other currency required for business operations. If a foreign currency is used, the values must also be shown in Swiss francs. The used foreign exchange rates as per the official list of exchange rates published by the Swiss Federal Tax Administration available under this link (here) must be disclosed in the notes.

Swiss accounting must be conducted in one of the official Swiss languages or in English. It may be carried out in writing, electronically or in a comparable manner (here).

The Swiss SME Chart of Accounts ("Kontorahmen KMU") available under this link (here) is the authoritative and binding guideline for how Swiss companies must structure their general accounting ledger (see also below). Individual accounts can be omitted, and others can be added from the Swiss SME Chart of Accounts depending on business realities, but its general structure must be retained.

1. Accounting Principles under the Swiss Code of Obligations

Bookkeeping is the art of recording business transactions according to a logical plan that can be readily interpreted. Accounting, which has been called the "language of business", begins where bookkeeping ends.

Accounting is "a science which treats of the methods of recording transactions in business, and interprets the statements recorded in books and documents so that the layman may have a clear conception of the exact financial and managerial standing of the firm" (J.C. Duncan, A Definition of Accounting, 1909).

According to Art. 957 et seq. of the Swiss Code of Obligations (here), accounting in Switzerland has the objective of capturing business events and circumstances ("Geschäftsvorfälle und Sachverhalte") which are necessary for the presentation of the assets, liabilities, and profits of the Swiss company, that is, of its overall economic situation.

Accounting is the basis for subsequent financial reporting.

Financial reporting is the financial results of an organization that are released to its stakeholders and the public.

a) Generally Accepted Accounting Principles in Switzerland (Swiss GAAP) - "Grundsätze ordnungsmässiger Buchführung" (GoB)

Accounting in Switzerland follows recognized accounting principles, commented in detail below, in particular those stated by the legislator under Art. 957a - Art. 965 CO (here):

1. Complete, correct, and systematic recording of business events and transactions
2. Documentary evidence ("Belegnachweis") for all individual transactions
3. Clarity
4. Adequacy with regard to the type and size of the company
5. Verifiability

Principle of completeness ("Vollständigkeitsprinzip")

According to the principle of completeness, all business events subject to accounting ("buchungspflichtig") must be recorded without gaps and on an accrual basis. Subject to accounting in Switzerland are all business events and transactions that have a direct or indirect effect on the size, composition and development of the assets, liabilities, and equity of the Swiss company.

With regard to presenting the financial reports, the principle of completeness requires that all information which is relevant for the assessment of the financial situation of the company is disclosed, in particular a complete disclosure of all its liabilities. No essential information must be withheld.

Principle of correctness ("Grundsatz der Richtigkeit")

According to the principle of correctness (absence of arbitrariness), the completely recorded data must be correctly allocated in an unaltered manner to the respective account.

Principle of systematicity ("Systematische Erfassung")

The principle of systematicity comprises (i) the principle of logical accrual ("Grundsatz der sachlichen Abgrenzung") and (ii) the principle of chronological accrual ("Grundsatz der zeitlichen Abgrenzung").

The principle of logical accrual requires that all expenses that serve to generate a specific income must be recognized at the same time as the income is generated ("matching of cost and revenue").

The principle of chronological accrual requires that expenses and income that accrue to specific periods (e.g. interest, rent) must be recognized accordingly. Expenses and income relating to prior periods must be recognized as relating to other accounting periods.

Principle of documentary evidence ("Grundsatz der Dokumentation")

Under the principle of documentation, documentary evidence is required for every accounting entry, thereby lending proof to the business event itself ("no booking without documentary evidence" - "keine Buchung ohne Beleg"). The generation, classification, and storage of documentary evidence (such as invoices, bank statements, transaction reports, inventories etc.) is therefore of paramount importance. Poorly organized documentary evidence in accounting represents a factor of uncertainty and disturbance, which can affect the credibility of the result.

In Switzerland, documentary evidence ("Buchungsbelege") is "any written record on paper or in electronic or comparable form that is required to be in a position to verify the business event or transactions behind an accounting entry".

Principle of clarity ("Klarheitsprinzip")

The principle of clarity in accounting crystallizes into the following requirements:

• Readability of records
• Comprehensibility of records for a competent third party
• Unambiguity in the designation of individual business events and transactions
• Clarity in the presentation of relationships (i) between individual accounting entries and (ii) with regard to additional accounting records
• Clear reference to documentary evidence on which the accounting ledger is based
• Clear marking of corrections in the accounts

Principle of verifiability ("Grundsatz der Nachprüfbarkeit")

The principle of verifiability comprises the following best practices with regard to accounting records:

• In the case of paperless processing, accounting records must be verifiable at all times with the aid of an easily intelligible access key and an appropriate filing system, and access to the documents must be secured at all times
• Accounting records must be secured against subsequent changes (no pencil records, protected computer environments, etc.)
• Corrections to accounting records must be made by means of cancellations or re-bookings, but under no circumstances must the original numbers be made unrecognizable or deleted without leaving a trace
• Each accounting entry requires an underlying and verifiable document
• Documentary evidence must be dated and, if necessary, numbered

(i) Accrual accounting

Under the matching principle, revenue and cost items of Swiss companies must be recorded in the year to which they accrue logically and chronologically: in other words, expenses must be recorded in the same accounting period as the revenues to which they are related (matching of cost and revenue).

(ii) Cash accounting

However, Swiss companies with yearly net revenues under CHF 100,000 do not need to observe the principle of chronological accrual and can engage in cash accounting which recognizes transactions only when payment is effectively made. However, the principle of logical accrual must still be observed.

b) Principles underlying Swiss financial reporting - "Grundsätze ordnungsmässiger Rechnungslegung" (GoR)

Financial reporting in Switzerland ("Rechnungslegung") serves the purpose of presenting the economic situation of a company in such a way as to enable third parties to make a reliable judgement ("die Rechnungslegung soll die wirtschaftliche Lage des Unternehmens so darstellen, dass sich Dritte ein zuverlässiges Urteil bilden können"). This is the most important accounting principle in Switzerland for all Swiss companies and accountants.

In addition, all items featuring on the balance sheet, or mentioned in the corresponding notes, must be corroborated by documentary evidence, an inventory, or by some other method ("Bestandesermittlung").

Going-concern assumption

Financial reporting in Switzerland is based on the assumption that the company will remain a going concern for the foreseeable future and is not in danger of insolvency.

If it is intended or probably unavoidable that all or some company activities will cease within twelve months starting from balance sheet date, then the financial reports for the relevant company assets must be based on recovery values. Provisions must be made for expenses related to the expected liquidation.

Presentation of financial reports

In Switzerland, the financial reports can be adapted to the specific business or industry realities of the Swiss company if the statutory minimum content is preserved.

Items that have no, or a negligible, value need not be shown separately.

In the annual financial reports, the corresponding values of the previous year must be shown alongside the figures for the current financial year.

The most important financial reporting principles in Switzerland build on, complement, and sometimes are identical with, the Swiss accounting principles discussed above. In the following, we only discuss those principles which were not already described earlier.

In essence, the Swiss principles of financial reporting are as follows (Art. 958c):

1. Swiss financial reporting must be clear and understandable
2. It must be complete
3. It must be reliable
4. It must include essential information
5. It must be prudent
6. Swiss financial reporting must use the same presentation and valuation methods over the years
7. Assets and liabilities, as well as income and expenses, may not be offset against each other

Principle of reliability ("Grundsatz der Verlässlichkeit")

The information provided by the financial statements must be reliable, that is, free of material misstatements. Again, they must present the economic situation of the company in such a way as to enable third parties to make a reliable judgement.

Principle of adequacy and materiality ("Wesentlichkeitsprinzip")

Under generally accepted Swiss reporting principles, financial reporting is not about absolute accuracy. Insignificant factors with no impact on a reader's judgment can be disregarded.

Information is material if its omission or misstatement could influence the decisions to be made based on the financial statements. There are no general requirements for determining whether a business event or circumstance is material; it is a case-by-case assessment.

Materiality must be interpreted with reference to the objective of financial reporting. The question is whether or not a particular disclosure could cause the addressee of the financial statements to form a different opinion about the economic situation of the company.

Principle of prudence ("Vorsichtsprinzip")

The principle of prudence is of paramount importance in Swiss accounting law. It states that the valuation of company assets and liabilities must be carried out prudently, but this must not prevent the reliable assessment of the economic position of the company. In cases of doubt, the principle of prudence requires a valuation approach that is less favorable to the overall asset situation.

A further articulation of the principle of prudence is the principle of imparity ("Imparitätsprinzip"). Imparity means inequality in connection with the recognition of profits and losses: profits must only be recognized when they were realized, whereas expected losses must be recognized even when they are yet unrealized.

Accordingly, the principle of realization ("Realisationsprinzip") stipulates that a profit can only be reported when the underlying transaction was economically realized (e.g. a good was effectively delivered, a service was fully rendered).

Finally, the lower of cost or market (LCM) principle ("Niederstwertprinzip") generally states that in all cases of uncertainty with regard to valuation, the more prudently determined of two possible values must be used, often translated in the expression "whichever is lower".

Principle of consistency ("Stetigkeitsprinzip")

Under the principle of consistency, the financial statements in Switzerland must be prepared in accordance with the same principles as used in previous years. The purpose of this principle is to ensure the comparability of financial statements over time. This purpose is also underlying the requirement to state the previous year's figures in all parts of the financial statements.

2. Accounting Standards under Swiss GAAP FER

Swiss GAAP FER ("Swiss Generally Accepted Accounting Principles Fachempfehlungen zur Rechnungslegung") is a recognized financial reporting standard in Switzerland and an alternative to IFRS reporting.

In fact, more and more small and mid-sized enterprises in Switzerland want to equip their investors and stakeholders with meaningful financial reporting going beyond the minimum standards of Swiss law, thereby promoting (i) comparability (ii) enhanced transparency and ultimately (iii) trust in numbers by adopting a "true and fair view".

3. Accounting Methods in Switzerland

a) Creditors / Debtors Accounting

In application of the creditors / debtors bookkeeping method ("Kreditoren- / Debitorenbuchhaltung"), an individual auxiliary account is created for every creditor (supplier, vendor) and for every debtor (client, customer).

In the following, a first booking is made for every incoming or outgoing invoice, which is temporarily booked to these auxiliary accounts. Subsequently, when the respective payment effectively arrived at the bank, a second booking is made from these temporary creditors' accounts payable (AP) or debtors' accounts receivable (AR) to the bank.

b) Open Items Accounting

In application of the open items bookkeeping method ("Offenposten-Buchhaltung"), incoming and outgoing invoices are not immediately booked, but only when the respective payments effectively arrive at the bank.

4. Our Accounting and Advisory Services

• Outsourcing of the accounting function for Swiss companies - our accountants are accessible (no out-of-office messages)
• Focus on Swiss SMEs and international trading businesses based in Switzerland: solution-oriented advice on accounting issues and acquaintance with Swiss accounting software (Abacus, Banana, Bexio, Klara, etc.)
• Multi-lingual accounting support: German, English, Dutch, French, Spanish, Italian, Ukrainian, Russian
• Registration with the Swiss VAT, quarterly submission of VAT, payroll accounting, submission of tax return to the cantonal authorities: good contact with relevant cantonal and federal authorities (tax, VAT, social security, pension funds, commercial registries, etc.)
• Process improvement to achieve efficient, timely, and accurate financial reporting: deep technical accounting knowledge, in addition to relevant industry experience

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Useful links

EXPERTsuisse (2014) Schweizer Handbuch der Wirtschaftsprüfung, Band "Buchführung und Rechnungslegung" (here)

Jürg Hirschi, Giulio Trepp, Fritz Zulliger (2020) Finanzbuchhaltung. Repetition und Vertiefung (Lehrmittelverlag Hirschi, Trepp und Zulliger)

Rosemarie Rossi (2021) Sozialversicherungen - Löhne - Finanzspezifische Personaladministration (Verlag SKV) (here)

Swiss Federal Customs Administration, Average monthly exchange rates per currency and year (here)

Swiss Federal Tax Administration, List of official Swiss end-of-year currency exchange rates (here)

Swiss GAAP FER (2020) Accounting and Reporting Recommendations (here)

Switzerland, SME Portal for small and medium-sized enterprises: Everything you need to know about accounting, auditing, finances and controlling (here)

Swiss Ordinance on Business Records (2013) (here)

veb.ch – Schweizer Verband für Rechnungslegung und Controlling, Swiss SME Chart of Accounts (here)

Dieter Pfaff, Stephan Glanz, Thomas Stenz, Florian Zihler (2019) Rechnungslegung nach Obligationenrecht, veb.ch Praxiskommentar mit Berücksichtigung steuerrechtlicher Vorschriften (here)