Balancing the Books: Accounting Practices in Iceland

Iceland has adopted the reporting requirements set out in the European IAS/IFRS. Iceland is a member of the European Economic Area (EEA). These IAS and IFRS rules are intended to simplify the way companies prepare their financial reports. Every organised economy must have these rules and formats in place to ensure that companies, especially listed companies and public limited companies, operate in a transparent manner. These companies have received investment from the public and the government has a responsibility to protect their interests. Accounting in Iceland follows these standards.

The Basics of the Accounting Requirements

The standard accounting or tax year in Iceland runs from 1 January to 31 December of each year. All companies must disclose the details of their finances at the end of the year. The reports submitted at this time must include a general annual report as well as the company’s balance sheet and profit and loss account.

Icelandic accounting laws provide different rules for companies depending on their constitution. Those raising capital must send a copy of their annual report to the judicial authorities for review.

There are rules for the appointment of auditors by public limited companies. In the case of public limited companies, an auditor or government inspector must audit the company's financial records. Companies whose shares are listed on the stock exchange must elect two audit teams at their internal board meetings. One of these must be an auditor appointed by the Icelandic government to carry out thorough investigations.

The purpose of these regulations is to ensure that there are no irregularities such as money laundering. These financial regulations have been drawn up by international agencies after extensive studies of financial transactions. A small percentage of companies may be operating with dark motives. There have been cases where illegal funds have been used for terrorist purposes. To prevent this from happening, the finances of all companies are scrutinised for the sources of their income and the authenticity of their expenditure. Some companies also deliberately declare losses even though they have made profits. This is also illegal, as it deprives the state of the taxes owed by these companies.

The Icelandic Ministry is the central authority for monitoring these IAS/IFRS rules and regulations. The professional association The Institute of State Authorised Public Accountants in Iceland is responsible for the implementation of the accounting rules in Iceland.

Accounting Education

The largest university in Iceland, Reykjavik University (Haskolinn I Reykjavik, in the local language), offers courses leading to the MAcc degree in Financial Accounting and Auditing. After graduation, a candidate must gain some work experience and then pass an accountancy exam to qualify for employment with either the government or private companies operating in Iceland.

Investor Knowledge on Practices in Iceland

Companies planning to invest in Iceland should be better informed about these regulations before committing their finances. Many companies from Europe should already be familiar with them, as the IFRS rules apply to all EEA countries. If you are from outside Europe but see the potential for your business in Iceland, you should be familiar with the way the accounting rules are followed in Iceland. You can find information on all aspects of investing and doing business in this country from many organisations. You can also visit the websites of the organisations mentioned above to find out more about these topics.

If you still require any kind of assistance for doing business or accounting in Iceland, contact Swapp Agency .