This article presents the most important changes and we would recommend that everyone involved to any extent whatsoever in accounting and financial reporting study the law in detail.Act No. 221/2015 Sb. (Coll.) ratified an amendment to the Accounting Act the main aim of which is the transposition of Directive 2013/34/EU. This amendment will enter into effect on 1 January 2016. The following are the most important changes which the amendment brings:
· new definitions of public-interest entities in Section 1a;
· new categories of accounting entities in Section 1b; i.e. categorisation into micro entities, small entities, medium-sized entities and large entities;
· newly-introduced single-entry bookkeeping, the conditions for such bookkeeping and the scope of this single-entry bookkeeping;
· the introduction of the obligation to compile an overview of cash flows and a statement on changes in equity for practically all business corporations;
· the obligation to take into account in financial statements significant facts to occur between the balance date and the time of compiling the financial statements;
· the newly-defined obligation to undergo audit in relation to the new categorisation of accounting entities;
· new criteria for exemption from the obligation to compile consolidated financial statements;
· the new obligation to compile and publish a report on payments to governments.
A definition of public-interest entities was until now found in the Auditors Act, from where it is moving to the Accounting Act. What is important here is that the new definition of public-interest entities is significantly narrower than the existing definition and is therefore closer to the "European definition" of public-interest entities. Public-interest entities are therefore banks, savings banks and credit cooperatives, insurance companies, reinsurance companies, pension funds and health insurance companies.
The amendment now defines categories of accounting entities, i.e.:
1. micro entities, as accounting entities which do not exceed at least 2 of the following values: assets totalling CZK 9 million, annual total net turnover of CZK 18 million and an average of 10 employees;
2. small entities, as accounting entities which are not micro entities and which do not exceed at least 2 of the following values: assets totalling CZK 100 million, annual total net turnover of CZK 200 million and an average of 50 employees;
3. medium-sized entities, as accounting entities which are not micro or small entities and which do not exceed at least 2 of the following values: assets totalling CZK 500 million, annual total net turnover of CZK 1 billion and an average of 250 employees;
4. large entities are therefore accounting entities which exceed at least two of the following values: assets totalling CZK 500 million, annual total net turnover of CZK 1 billion and an average of 250 employees. In addition to this, public-interest entities and selected accounting entities are always large entities.
The obligation to undergo an audit of financial statements is newly defined in relation to this categorisation. Practically all large entities, with the exception of selected accounting entities which are not public-interest entities, and medium-sized entities have this obligation.
The obligation to undergo audit under the "old criteria", i.e. when reaching or exceeding at least one of the following criteria in two consecutive accounting periods, apply to small entities which are joint stock companies or trust funds: assets valued at CZK 40 million, net turnover of CZK 80 million and an average of 50 employees.
The obligation to undergo audit applies to other accounting entities if they exceed two of the criteria specified above in two consecutive accounting periods.
Consolidation groups are also now defined as follows:
1. small groups of accounting entities as groups consisting of a consolidating entity and consolidated entities which do not exceed at least 2 of the following criteria on the consolidated base: assets of CZK 100 million, net turnover of CZK 200 million and an average of 50 employees.
2. A medium-sized group is a group which is not a small group, which consists of a consolidating entity and consolidated entities and which does not exceed at least 2 of the following criteria on the balance date: assets of CZK 500 million, net turnover of CZK 1 billion and an average of 250 employees.
3. A large group is a group which consists of a consolidating entity and consolidated entities and which exceeds the criteria specified above.
The law also introduces exceptions to the obligation of consolidation. Evidently the most important exceptions are found in Section 22a, when the obligation to compile consolidated financial statements is not imposed on a consolidating entity when that entity is part of the consolidation unit of another consolidating entity which is a foreign entity governed by the law of a European Union Member State, this foreign consolidating entity either holds all shares or at least 90 % of the shares and other shareholders have approved the fact that this consolidation is not compiled. If the share is lower than 90 %, consolidation may be avoided when the other shareholders and members fail to request the compilation of such consolidated financial statements earlier than 6 months before the end of the accounting period.
