Changes in the Accounting Act in 2015 (Part II)
The second part of our newsletter about changes in the Accounting Act explains a new classification of consolidated groups, and the terms “public interest entity” and “report on payments to governments”.
Classification of consolidated groups
Consolidated groups will be classified as:
- small consolidated group (not mandatorily required to prepare consolidated financial statements if there is no public interest entity in the group);
- other consolidated groups (mid-size and large groups – need not be distinguished as such because both types are mandatorily required to prepare consolidated financial statements)
Under the proposed wording of Section 1b(6), a small group of companies is a group comprising a consolidating company and consolidating companies, which does not exceed, on a consolidated basis, at least two of the following threshold values as at the balance sheet date:
- assets of CZK 100,000,000;
- net turnover of CZK 200,000,000;
- an average of 50 employees during an accounting period.
In comparison to currently applicable thresholds for the three criteria, the values for consolidated groups have been reduced. The change can be expected to result in a higher number of consolidated financial statements.
“Public interest entity” introduced
This term is not quite new to Czech legislation. It has merely been moved from the Auditors Act to the Accounting Act.
Based on the definition of public interest entity, a company is subject to a special regime with more stringent requirements and stricter criteria applicable to reporting and auditing.
A company is a public interest entity:
- registered in the Czech Republic and listed in Section 19a (1)1
- registered in the European Economic Area if it is a bank, savings society or credit union, insurer, reinsurer or pension insurance company;
- the General Health Insurance Company of the Czech Republic (Všeobecná zdravotní pojišťovna České republiky) or a health insurance company.
Obligation to prepare and publish a report on payments to governments
The report must be prepared by:
- large companies;
- public interest entities
- the mining industry (carrying out any activity related to the research, discovery, development and extraction of minerals and oil deposits, natural gas reserves or any other substances);
- the logging industry in native woodland.Data presented in the report will be classified by country and by project. The report must include payment exceeding EUR 100,000 (CZK 2,600,000) for an accounting period, irrespective of whether it was made at once or in a series of related payments. This emphasises the materiality principle.The report will be produced individually and will be consolidated.
1 Section 19a (1) of Act No. 563/1991 Sb., on Accounting, as amended.