Changes in the accounting act in 2016 (part I)

New Year 2016 is approaching, ushering in new changes and obligations introduced by the most extensive amendment to the Accounting Act in recent years. As the amendment was signed by the President on 25 August 2015, it will surely have an impact on all companies.

The draft amendment was prepared based on Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013, which must be transposed into Czech accounting law. Other reasons include the need for additional amendments in response to new legislation, and the completion of recodification changes.

What is new for company?

The main change is the classification of companies and consolidation groups. The Act reintroduces the regime of single-entry accounting and introduces a duty of large companies (see the classification below) to prepare a report on payments to governments.

Classification of companies

Companies are currently divided into three categories: issuers of securities on a regulated market (Section 19); small and medium-sized companies exceeding the employee number and turnover thresholds; and firms that do not go over such limits and therefore may choose simplified double-entry book-keeping.

From 1 January 2016, companies should be classified into four categories: micro companies, small, medium-sized and large companies.

The classification to a category will depend on the achievement (exceeding) of at least two out of three prescribed criteria:

the criteria are as follows:

1. Asset value – This means total assets, i.e. aggregate assets shown in the balance sheet and in the valuation, not adjusted for reserves, provisions and amortisation and depreciation.
2. Net turnover – Here an assessment is made of the net annual aggregate turnover, i.e. total revenues less sales discounts, divided by the number of uncompleted months of the accounting period, multiplied by twelve.
3. Average number of employees – the adjusted registered number of employees under the methodology of the Czech Statistical Office.

The criteria for determining the category to which a company will belong are listed in the following table:

The table below illustrates the obligations of individual companies according to category:

The next issue of our newsletter will explain the classification of consolidated groups and other changes introduced by the amended Act.

¹ The option of single-entry accounting is only available to companies that comply with the requirements under Section 9 (3) and (4) of the amended Accounting Act.