Reporting Requirements

The Superintendency of Corporations, the Superintendency of Securities, the Superintendency of Banks, the Tax and Customs Administration, and other Colombian government agencies issue rules and statements on accounting principles.

Colombian generally accepted accounting principles (GAAP) are contained in decrees. GAAP must be followed when financial statements are produced for any entity involved in income-producing activities in Colombia. These financial statements are expected to give a true and accurate view of the financial status of the entity, irrespective of tax requirements.

Also, standard formats must be complied with when recording any operation, according to the Unique Plan of Accounts (Plan enico de Cuentas).

Under Colombian corporate laws, accounting records have to be maintained in Colombian pesos and in Spanish. Face values of nonmonetary assets, nonmonetary liabilities, and net worth also must be adjusted for inflation and devaluation, using the percentage of adjustment for the fiscal year, a variation of the Consumer Price Index (see 9.06).

Joint stock corporations that list their shares on the stock exchange or issue liabilities, as well as all business entities that operate in the financial sector, must publish their annual financial statements in a local newspaper.

Accounting Principles and Standards

It is not unusual for Colombian subsidiaries and branches to issue two sets of financial statements. The first set of financial statements is for Colombian shareholders and local legal purposes, prepared in accordance with Colombian GAAP. The second set of financial statements is prepared in accordance with the accounting principles generally accepted in the headquarters' country.

Separate financial statements do not need to be filed for corporate income tax purposes. Financial statement adjustments used to arrive at the taxable profit (net income before tax) are listed in a tax computation schedule. Financial statements must be prepared once a year for tax purposes. Shareholders are free to prepare financial statements on additional dates. All companies are required to use the calendar year for reporting purposes, but certain entities, such as banks, must file monthly financial statements with the Superintendency of Banks.

Accounting Practices

The basic financial information consists of the balance sheet, the statement of income, the statement of retained earnings, the statement of changes in shareholder equity, the statement of changes in financial position, and the statement of cash flows.

Notes explaining the accounting policies of the company and additional information about items in the financial statements are considered to be an integral part of the basic financial information.


Although maximum depreciation rates are set for tax purposes, depreciation rates estimated in accordance with the useful life of an asset should be applied for accounting purposes. The principal depreciation methods are the straight-line, declining-balance, sum-of-the-years' digits, and units-of-production methods.

Property, plant, and equipment should be disclosed with related accumulated depreciation, amortization, or depletion.

Accumulated depreciation may be shown in total in the financial statements and their notes.

Research and Development Costs

Research and development (R&D) costs are incurred in the ordinary course of the accounting cycle. These costs consist of materials, equipment, facilities, personnel, and indirect costs that can be attributed to R&D activities. They can be amortized over five years.

Capitalization of Interests

The cost of an asset should include all of the costs or expenses incurred in enabling the asset to function prior to the date of the actual use of the asset. Interest incurred, prior to the date of the actual use of the asset, on debts directly related to the asset should be capitalized. Once the asset is completely ready to be used, the interest should not be capitalized.

Lessee Accounting

The classification of a leasing contract is determined by the circumstances surrounding the transaction. As a rule, the lease should be recorded as a capital lease. In only a few cases, prior to compliance with certain legal requirements, can such leases be classified as operating leases in the records.

Merger Accounting

Assets and liabilities of the merged company are recorded at book value.

Inventory Valuation

The most common methods for valuing inventory are the first-in, first-out (FIFO); last-in, first-out (LIFO); and weighted-average methods. The methods used to determine the ending inventory and the cost of sales are the perpetual inventory system, periodic inventory system, and retail system methods.

The standard cost method in financial reporting is acceptable for accounting purposes and may be used if adjustments are made to reflect current conditions. Tax law does not accept the standard cost method for establishing the cost of sales.


Dividends are registered as a liability of the company when they are declared on the basis of financial statements previously approved at the general shareholders' assembly. In accounting for dividends declared, retained earnings are decreased and the dividends are included in current liabilities.

Long-Term Contract Revenue

Long-term contract revenue may be recognized during the term of the contract, as well as at the completion of the contract. The following two accepted methods must comply with regulations:

  • The budget method recognizes revenues and profits on the basis of the progress of the work. Recognition is also based on a budget initially prepared for providing the services required under the contract.
  • The deferred cost and expenses method recognizes cost and expenses incurred only when the income has been recognized.

Deferred Taxes

Deferred taxes, debit or credit, are recorded as the result of timing differences between accounting and tax treatments of certain operations. They are reversed in the future, when the timing difference disappears.

Consolidated Financial Statements

The parent or holding company must prepare and make known consolidated financial statements presenting the financial position of the company, the result of the operations, the change in the net worth, and the cash flows of the parent or holding company and its subsidiaries. Investments in subsidiary companies that are not consolidated must also be recorded in the books of the parent or holding company through the equity method.

Unusual Items

Unusual items must be disclosed. In practice, significant gains or losses that are not recurrent and that result from transactions other than the company's normal activity are included separately in the statement of income.

Audit Requirements and Standards

Joint stock corporations, branches of foreign companies, limited liability companies, and mixed economy companies (companies organized with both state and private participation) with total assets exceeding 5,000 minimum salaries or total gross revenues exceeding 3,000 minimum salaries must have their financial statements audited. Such businesses are required to submit their audited financial statements to one of the following government agencies: the Superintendency of Corporations, the Superintendency of Banks, the Superintendency of Securities, and others not listed here.

In their report on the financial statements, Colombian auditors express an opinion as to whether the company's financial statements present a fair picture of the company's financial position, operations, and cash flows, pursuant to Colombian GAAP.

In Colombia, the statutory auditor (revisor fiscal) may be an audit firm or an individual. If it is an audit firm, it will name two Colombian certified public accountants to serve as principal and alternate statutory auditors. The audit firm may help its clients set up an accounting system; provide tax, legal, and management consulting advice; and give general guidance on business matters, as long as professional independence is maintained.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Mario Andrade, Deloitte & Touche, Santafe de Bogota, Colombia on Tel: +57 1 256 1548, Fax: +57 1 256 1557