Accounting news
Accounting reporting
The new accounting system should focus more on the information it provides to users. The primary concern will therefore be the preparation of financial statements in such a way that they give a true and fair view, with the actual bookkeeping technicalities taking second place.
A true and fair view is to be achieved through the quality of the accounting information provided. The amendment therefore focuses on the quality of accounting information so that it is relevant, credible, timely, understandable, reliable and comparable.
It should therefore take the form of modern financial accounting methods, which are designed to give a true picture of the situation of the entity in question, but also to show and predict the future development of that entity - not only for internal management use but also for benefit of external users such as creditors, banks or investors.
Fewer accounting units
The new rules change the categorisation of accounting units and reduce the number of entities that are required to keep accounting records. In the future, this obligation should not apply to organisational units of foreign entities, natural persons or small non-profit organisations that are not VAT payers and have annual revenues and total assets of less than CZK 3 million. However, these entities will still be required to keep records for the purposes of calculating tax obligations, or they may choose to keep accounting records voluntarily.
Mandatory audit for fewer companies
Under the amendment, the limits for mandatory audits will be significantly increased compared to the current conditions on almost all points except the number of employees. An audit will now be mandatory for entities that meet at least two of the three criteria - namely, a turnover exceeding CZK 240 million, a value of assets exceeding CZK 120 million, and a number of employees exceeding 50.
Accounting in functional currency
A recent innovation regarding functional currency will also be included in the planned amendment and introduces the possibility to keep accounting in a "functional currency" (US dollar, euro or British pound) if it is the currency of the entity's main economic environment. The Czech crown will then become a foreign currency for such an entity. With the amendment to the Act, the number of permitted currencies is to be expanded. For accounting entities, this change will mean easier financial reporting and budgeting, lower currency risks and simpler preparation of financial statements.
Leasing
Newly, long-term leases and rentals (longer than one year) will be reported as a way of acquiring the asset or "right to use". The specific method of recognition and accounting should then be based on the concept of a lease according to international accounting standards.
Goodwill
Under current legislation, the equivalent of goodwill is recognised as a valuation difference to the acquired assets or as a consolidation difference. The draft amendment provides for the unification of the procedures, whereby this difference will be recognised in intangible assets as goodwill and will be amortised over the period specified in the Decree.
Current or fair value
According to the draft amendment, all assets and debts will be reported at either current value or fair value. The current value is the valuation at the discounted value of future net cash flows. Fair value will be specified in more detail under IFRS 13. In other words, it will not be possible to value in the accounts assets and debts according to their initial assessment. The methods for valuing assets and debts should be further specified in a separate decree.
Provision for liquidation
If an entity has information about the disposal of an asset after the termination of its activity or its lifespan, it may be able to include the disposal cost in the input price of the asset through a disposal provision.
Sustainability Report
Another important change is the gradual extension of the obligation to prepare a so-called sustainability report. In addition to the companies that already have this obligation - that is, listed companies and large companies with more than 500 employees, which will already report information in their annual report for 2024 (published in 2025) - the obligation will be extended to all large companies that meet at least two of the following criteria in 2026 (when 2025 accounts will be reported): (i) they have more than 250 employees, (ii) they have a turnover of at least EUR 50 million and (iii) their total assets are at least EUR 25 million.
In subsequent phases, small- and medium-sized companies listed on the stock market and non-EU companies will also be obliged to report. Some Czech companies will have this obligation indirectly as part of a corporate chain that will have this obligation. In addition, the scope of information that companies will disclose about themselves or their corporate chain will be extended and will be a mandatory part of the annual report.
