Changes in the Accounting Act No. 431/2002 Coll., as amended (Act on Accounting) effective as of 1 January 2016 The Act on Accounting was amended in 2015 by Act 130/2015. The effective date of the Act is staggered, with different provisions coming into force on 1 July 2015, 1 January 2016 and 1 January 2017. In light of these changes, a brief overview of the most important amendments to the Act on Accounting, effective as of 1 January 2016, are presented here.
Definition of interest in an enterprise (§ 2 par. 4)
Significant interest in an enterprise is understood to be at least a 20% stake in the registered capital of another accounting entity held to constitute a permanent relationship with the accounting entity in order to contribute to its activities.
Adding an entity that does not utilise the financial year (§ 3 par. 8)
Besides government entities and self-employed individuals, legal entities owned by the national government, a municipality or a higher territorial unit are not permitted to use a financial year other than the calendar year.
Interime financial statements (§18 par. 4)
The amendment changes the scope of information disclosed in the interim financial statements. Any information from the beginning of the accounting period until the presentation date of the interim financial statements for the accounting period and information for the immediately preceding accounting period are to be presented in a new way.
Annual report (§20)
The amendment to the Act on Accounting also has provisions regarding the annual report. In this respect, the amendment changes the duties an auditor must perform in verifying the annual report.
It adds new provisions to §20a and §20b which oblige large accounting entities constituted under commercial law or public interest entities operating in extracting industries or in the clearance of natural forests to prepare and publish annual reports on payments to public authorities. The report does not have to disclose one-type payments to a country if their aggregate value is less than €100,000.
Consolidated financial statements (§22)
The amendment changes when a parent company has to prepare consolidated financial statement due to failure to comply with size conditions. In addition, a parent company is not required to prepare consolidated financial statements if information presented therein would be gained only at the price of excessively high costs or if shares in the subsidiary are held only for the purpose of selling them.
Deadline for filing financial statements (§23 par. 7)
Accounting entities are obliged in the meaning of these provisions to file their statements in the Financial Statements Registry at latest one year after the close of the accounting period for which the annual accounts are being prepared.
Amended definition of acquisition cost (§ 25 par 6 let. a)
Acquisition cost is considered to be the cost at which assets are acquired, including costs related to their acquisition and all reductions in acquisition cost.
Measurement of replacement cost (§ 25 par. 6 let. b)
Replacement cost has been fully deleted from the Act and replaced with fair value as defined in §27 of the Act on Accounting.
In relation thereto, §27 was amended to add Paragraph 8, providing the option of measuring securities and shares available for sale (captured in account 063 – Available-for-sale securities and shares) at fair value, where in the past only acquisition cost could be used.
Writing down goodwill and capitalised development costs (§ 28 par. 4)
Goodwill and capitalised development costs recognised after 1 January 2016 that cannot be reliably measured or whose useful life cannot be estimated is to be written off within five years of acquisition.
New accounting procedures effective as of 1 January 2016
On 29 December 2015, the Ministry of Finance published new rules governing accounting procedures and the framework chart of accounts for businesses using double-entry accounting effective as of 31 December 2015. Among other things, new provisions define mainly the substantive of accounts covering receivables and payables of participating interests and between otherwise parties related in terms of assets (062, 066, 351, 355, 361, 365 and 471). The measure also regulates the accounting of receivables and payables if the debtor is restructuring and in accounting for sponsorship entitlements.
