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Accounting Act amendment – major points

The Chamber of Deputies of the Parliament of the Czech Republic passed the proposed amendment to the Accounting Act. This government bill is expected to be passed by the Senate without any changes. The Accounting Act amendment regulates two crucial areas, namely the application of international accounting standards for accounting and preparation of financial statements and preparation of consolidated financial statements. This article summarises the most important points of the amendment.

Application of international accounting standards for accounting and preparation of financial statements

An accounting entity may apply international accounting standards for its accounting and preparation of financial statements if it trades in issued securities on a regulated market in the EU, or if it expects to prepare consolidated financial statements in accordance with international accounting standards.

- Issuers of securities traded on a regulated market in the EU

A trading company which is an issuer of securities accepted for trading on a regulated market in a Member State of the European Union shall apply international accounting standards for accounting and preparation of financial statements. Such a trading company may apply international accounting standards as early as the beginning of the accounting period in which a security has been accepted for such trading, or from the beginning of the next accounting period.

In the event of a termination of trading in securities on a regulated market within the EU, an accounting entity may decide to apply international accounting standards until the end of the accounting period in which the securities are no longer being traded, or it may decide that their application will terminate as of/at the last day of the previous accounting period.

If, in the event of termination of trading in securities on a regulated market within the EU, the supreme body of the accounting entity will decide, by the end of the accounting period, on a plan to ask for a new security to be accepted for trading on a regulated market within the EU no later than three years from the date trading has been terminated, the accounting entity may decide to apply international accounting standards until the end of the accounting period in which the new security is supposed to be accepted for trading.

If the accounting entity, no later than on the last day of the accounting period in which the mentioned three-year period terminates, asks for a new security to be accepted for trading on a regulated market within the EU, then it may extend the application of international accounting standards by one more accounting period. If the security is not accepted for such trading in this accounting period, the accounting entity shall not apply international accounting standards for its accounting and preparation of financial statements as from the next accounting period.

The Accounting Act amendment therefore allows accounting entities to continue in applying international accounting standards for a limited period of time when such accounting entities temporarily do not trade in issued securities on a regulated market within the EU, and do not change the accounting system for such a period.

- Prerequisite of preparing consolidated financial statements in accordance with international accounting standards

The supreme body of an accounting entity may decide on the application of international accounting standards for its accounting and preparation of separate financial statements in the event of an assumed preparation of the consolidated financial statements while applying these standards.


Preparation of consolidated financial statements

Consolidated financial statements must give a true and fair view of the object of the accounting and financial situation of a consolidation group, associates and jointly controlled entities. A consolidating accounting entity is not liable to prepare consolidated financial statements provided that financial statements of such a consolidating accounting entity are sufficient to give a true and fair view of the object of the accounting and financial situation of the consolidation group, as the consolidated accounting entities are both separately and in aggregate immaterial.

If you have any questions regarding these issues, please do not hesitate to contact us.

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