Corporate finance in the Czech Republic is undergoing the biggest transformation in the last thirty years. The new Accounting Act and related legislative changes are changing the fundamental principles of financial reporting. For company management, this means one thing: this is not merely a change in accounting methodology, but a massive intervention into IT infrastructure and corporate ERP systems. While the comprehensive recodification is approaching its full implementation, the first wave of changes related to threshold adjustments and digitalisation is already well underway. Leaving the software upgrade until the last minute means risking system failures and non-compliance with legal requirements.
4 Critical ERP Areas Requiring Immediate Action
A successful transition to the new legislation will require comprehensive reconfiguration and development of key modules. In particular, you should focus on the following areas:
· Reconfiguration of the fixed asset module: The existing system of six depreciation categories is becoming a thing of the past. It is being replaced by new monthly depreciation methods and the introduction of the unified concept of “tax value”. For IT, this means completely rewriting depreciation schedules and algorithms within the software.
· New leasing module (IFRS effect): Operating leases will no longer be treated merely as an expense. They will now have to be recognised directly on the balance sheet as an asset (right-of-use asset) and a financial liability. Your software therefore needs to be able to calculate the present value of lease payments and generate specific payment schedules.
· Fully electronic archiving and validation: The legislation paves the way for full digitalisation and the electronic circulation of documents. Accounting software must ensure the authenticity of origin and integrity of content, for example through time stamps and electronic signatures, in compliance with the new standards for electronic archiving.
· Changes to valuation methodology: Greater emphasis is being placed on economic substance over form and on the fair value of assets. Systems will therefore need to support more flexible revaluation and the recognition of impairment allowances based on the new rules.
The Risk of “Off-the-Shelf” Software and Customisations
If your company uses off-the-shelf software, you are dependent on when and in what quality the provider releases an update. However, these universal packages often do not cover a company’s specific internal processes.
Companies with customised ERP systems face an even greater challenge. Any intervention in the system core due to new legislation may disrupt other interconnected modules – from inventory management to logistics and invoicing. Developing and testing such modifications can take months.
What Should You Do? Involve Your Auditor Before Your Programmers
The most common mistake is for a company to assign the software update to its IT department without first providing clear methodological requirements. IT specialists understand the code, but they do not necessarily know the detailed nuances of the new Accounting Act. The result can be software errors that are only discovered during a subsequent audit – and correcting them can be extremely costly.
We recommend proceeding in three steps:
- Impact analysis (GAP analysis): Together with our audit team, we identify which specific changes affect your company and what new data inputs will be required.
- Methodological specifications for IT: We prepare precise specifications for your IT department or external ERP provider. This gives programmers clear instructions on which algorithms and database fields need to be changed.
- Testing in a sandbox: Before going live, a test environment (sandbox) should be used to verify with real data whether the system generates financial statements and reports precisely in accordance with the new legislation.
Conclusion: Time Is Working Against You
Preparing your systems for the new Accounting Act is not a routine update that can simply be installed during a weekend shutdown. It requires close cooperation between the finance department, IT developers and auditors. Starting early will ensure a smooth transition, business continuity and peace of mind during the subsequent audit of the financial statements.
Do you need help preparing technical and methodological specifications for updating your accounting software? Contact our specialists. We can help you bridge the gap between the world of legal requirements and the world of IT code.
