How to read Danish company annual reports
Annual reports from small Danish companies often show no revenue. Nothing is being hidden: the reporting class small companies fall into need not disclose it. Calculate the usual ratios without knowing this and you get blanks, or the wrong numbers.
Disclosure depends on the reporting class
The Danish Financial Statements Act (Årsregnskabsloven, ÅRL) sorts companies into reporting classes A to D by size and listing status, each with its own disclosure requirements.
- Small companies (class B, § 7): those that for two consecutive years do not exceed two of: total assets DKK 55m, net revenue DKK 111m, an average of 50 full-time employees.
- Minimum content for class B (§ 22): balance sheet, income statement, notes and management review — no cash flow statement, which becomes mandatory from class C (§ 78).
- Gross profit instead of revenue (§ 32): revenue and cost items may be combined into a single "gross profit" (bruttofortjeneste) line.
That is why small companies' reports often show no revenue. In Caveat's figures, 7.4% of Danish unlisted companies report revenue and 82% report gross profit. Balance-sheet items such as assets, equity and net profit are usually present. Companies are identified by their CVR number.
The accounts may be unaudited
A class B company may skip the audit if for two consecutive years it does not exceed two of: total assets DKK 4m, net revenue DKK 8m, an average of 12 full-time employees (ÅRL § 135). The exemption does not apply if total assets exceed DKK 50m for two consecutive years. A small counterparty's figures may therefore be unaudited; check whether an auditor's report is attached.
What can be calculated
- Available: measures built from the balance sheet and net profit — current ratio, debt-to-equity, equity ratio, ROA and ROE.
- Mostly unavailable: anything using revenue (margins, turnover, the cash conversion cycle, Altman Z') or cash flow.
Gross profit (bruttofortjeneste) is not revenue. Class B income statements often start with gross profit instead of revenue; it is revenue minus cost of sales and other external expenses. Using it as revenue makes margins far too high and turnover far too low, quietly corrupting every ratio that divides by sales.
Holding companies: small Danish businesses often sit under a holding ApS whose balance sheet is just shareholdings, making liquidity ratios and ROA meaningless. Check first whether your counterparty is the holding or the operating company.
Limitations
- Class B requirements are a minimum; some companies disclose revenue voluntarily.
- Listed companies file IFRS consolidated statements; do not mix them with unlisted companies' individual statements.
- For reference only; it does not replace credit, investment or tax decisions.
FAQ
- Why do small Danish companies' reports have no revenue?
- Reporting class B, where small companies sit, need not disclose revenue or a cash flow statement, and most do not.
- Can bruttofortjeneste be used as revenue?
- No. It is gross profit after cost of sales and other external expenses; using it as revenue badly distorts margins and turnover.
- What can be diagnosed without revenue?
- Balance-sheet and net-profit measures such as the current ratio, debt-to-equity, equity ratio, ROA and ROE. Margins, turnover and failure-risk scores need revenue.
- Why isn't a Danish company's first financial year 12 months?
- Under § 15 of the Danish Financial Statements Act, the first financial period may be shorter or longer than 12 months, up to 18 months. Align the period length before comparing the first year with the next.
- How can I tell if a counterparty is a holding company?
- If its assets are mostly shares in subsidiaries and it has almost no revenue, inventory or receivables, it is probably a holding company. Look up the operating subsidiary's annual report as well.