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IB Grant Thornton: Act on Accounting: Information about the upcoming changes of the Act on Accounting

Currently the hearing of the amendment of the Act on Accounting No. 563/1991 Coll. is on the plan of the Chamber of Deputies of the Czech Parliament.

Let us inform you about the essential upcoming changes in the following article: The Act shall be brought into effect from 1 January 2011.

1/ The use of International Financial Reporting Standards (latest § 19a):

from now on
a) a duty would be imposed on Accounting entities with the registred office in the member state of the European Union that issue securities accepted for trading on the controlled stock market

or
b) a possibility would be given to accounting entities subjected to consolidation

to use International Financial Reporting Standards (IFRS) for accounting and preparation of individual financial statements if the consolidating company uses the IFRS to prepare the consolidated financial statements

For the involved accounting entities it would probably mean the following:

- ALL IFRS would have to be applied on the preparation of single financial statements according to IFRS; it means they would also have the duty to prepare “complete” (it means extensive) notes to the financial statements.
- for the assessment of tax liability the individua financial statements will have to be available in which the profit before tax was set in accordance with the Czech accounting regulations, such as Act on Accountancy, Decree on Double Entry Accounting and individua accounting standards.

Determination of the accounting period for the use of International Financial Reporting Standards and the use itself has to be approved by the decision of the supreme body of the accounting entity.

For the first time this duty (right) will be applied in the accounting period starting in 2011 or later.

2/ The Consolidated Financial Statements - § 22 cancelled and replaced by § 22 to § 22b:

Those new sections of the Act on Accountancy regulate, specify and extend existing provisions relating to the CONSOLIDATED FINANCIAL STATEMENTS:

- composition of a consolidation group
- the duty to prepare consolidated financial statements
- criteria specifying when is the consolidating accounting entity not obliged to prepare the consolidated financial statements
- new: the consolidating accounting entity is not obliged to prepare the consolidated financial statements if the financial statement of such an entity is sufficient enough to give a true and fair view of the financial situation of the object of the accounting of the consolidation group, as the consolidation accounting entity controls only individual and entirely unimportant consolidated accounting entities.
- The duty to prepare consolidated annual report

These provisions will apply in the accounting period starting in 2010 or later.

3/ Administrative offence- § 37 cancelled and replaced by new § 37, § 37a, § 37aa, § 37ab:

OFFENCE is committed by those accounting entities that are not entrepreneurs
ADMINISTRATIVE OFFENCE is being dealt with between accounting entities – business persons and consolidating accounting entities.

The list of offences is defined. The penalties that may be imposed are 3 % or 6 % of the assets value (gross) – according to the type of the offence. If during the proceedings on the imposition of the fine it is found out that the assets value (gross) is not adequate, then the basis for calculation of the fine is the assets value recognized during the proceedings on the fine imposition. According to this law the administrative offence is firstly being dealt with by the Tax office.

These provisions will apply from 1st January
2011.

If the proceedings on the imposition of the fine have already started and have not been finished before the effective date of this amendment, then they will be finalized according to the previously valid regulation as long as the new one is not more beneficial for the accounting entity.

4/Specifies which accounting entities will have the obligatory duty to prepare Cash Flow and statement on change in equity and when.

This is only informatory specification of the changes, as soon as the amendment will be discussed and authorized– we will let you know.


Ing.Michal Kováč
Audit Managing Partner
IB Grant Thornton
Na Bojišti 18
CZ-120 00 Praha 2
T +420 296 152 111
F +420 296 181 484
E m.kovac@ib-gtpraha.cz