In our last article, we discussed the obligation of accounting entities to publish their financial statements in the Collection of Deeds, including the legal deadline and scope of publication. If you need details on how you can publish your financial statements, including the options for sending them to the registry court or the penalties for failing to do so, see our article on publishing financial statements in the Collection of Deeds.

As a brief reminder, all entities that are registered in public registers, or those that are required by law to do so, are obliged to publish their financial statements in the Collection of Deeds. This includes business corporations, institutes, foundations, associations and unit owners’ associations. This obligation is stipulated in Act No. 304/2013 Coll., on Public Registers, Section 66, and in the Accounting Act No. 563/1991 Coll., Section 21a, as amended.

 

Publication of financial statements

Accounting entities are obliged to publish the financial statements to the extent required by Section 18(4) of the Accounting Act, i.e. either in full or in abridged form, including a report audited by an auditor if the entity meets the criteria for a statutory audit of the financial statements.

Interesting insights and tips from practice in preparing financial statements can be found in an article on the Jaspar blog, which describes common errors and problems such as incorrect accounting for bank loans, work in progress and accrual of expenses.

 

Separation of accounting units

You need to determine which category your company (entity) belongs to. The division of accounting units is determined by the Accounting Act and the division is as follows:

• Micro-entities
• Small accounting units:
  • with statutory audit obligations
  • without audit obligation
• Medium-sized accounting units
• Large accounting units

 

Public interest entities

Public Interest Entities – an accounting entity with its registered office in the Czech Republic, which is a trading company that has issued investment securities admitted to trading on a European regulated market, a bank (under the Act regulating the activities of banks), a savings and credit cooperative (under the Act regulating the activities of savings and credit cooperatives), an insurance or reinsurance company (under the Act regulating the activities of insurance and reinsurance companies), a pension company (under the Act regulating pension savings or supplementary pension savings), a health insurance company.

 

Selected accounting units

Selected accounting units according to Section 1(3) of the Accounting Act – organisational units of the State, State funds according to budgetary rules, territorial self-government units, voluntary associations of municipalities, regional councils of cohesion regions, contributory organisations and health insurance companies – these are not business entities.

 

Other large accounting units

Other large entities are distinguished according to other specific criteria.

 

Obligations of accounting units by category

The category of an entity determines its obligations. The category to which an entity belongs determines its obligations regarding the extent of bookkeeping, etc. Testing and categorisation (or reclassification) is normally carried out at the beginning of the accounting period. If an entity exceeds or ceases to exceed the two thresholds of the relevant criteria (assets, turnover and average number of employees) on two consecutive balance sheet dates of the regular financial statements, it shall change its category from the beginning of the immediately following financial year.

 

Newly created entities

If you are a newly established entity, in the first accounting period after your incorporation or commencement of operations, you shall follow the legal treatment for the category in which the conditions of that category can be expected to be met at the balance sheet date of the first accounting period.

 

Basic accounting obligations

Basic accounting policies cover the following areas:

• scope of accounting – full/simplified
• scope of preparation of financial statements – full/shortened
• obligation to produce an annual report – yes/no
• scope of publication of the financial statements and annual report
• obligation to prepare a cash flow statement and a statement of changes in equity
• obligation to disclose non-financial information in the annual report
• use of selected accounting policies – fair value/equivalence measurement
• obligation to report on payments
• the obligation to audit the financial statements in accordance with Section 21 of the Accounting Act.

 

Entities without audit obligation

Non-audited entities have a more “light-touch” accounting regime and fewer obligations than others. In particular, for small accounting entities, the Accounting Act provides for obligations and possible exemptions from these obligations depending on whether or not the entity is subject to a statutory audit.

 

Criteria for categorisation

The criteria for categorisation are as follows:

• Total assets – the total net assets as determined from the balance sheet, i.e. the total gross assets after deduction of allowances and provisions.
• Annual aggregate net turnover – revenue less sales discounts divided by the number of months in the accounting period multiplied by twelve. This figure is found in the profit and loss account as ‘Net turnover for the period’.
• Average number of employees – the average calculated number of employees according to the methodology of the Czech Statistical Office.

 

Classification of accounting units by criteria

According to these criteria (unless the entities do not exceed at least two of the thresholds mentioned above at the balance sheet date), we classify the entities as follows:

 

Micro accounting units

• total assets up to CZK 9 000 000
• annual aggregate net turnover up to CZK 18 000 000
• average number of employees up to 10 persons

 

Small accounting units

• total assets up to CZK 100 000 000
• annual aggregate net turnover up to CZK 200 000 000
• average number of employees up to 50 persons

 

Medium-sized accounting units

• total assets up to CZK 500 000 000
• annual aggregate net turnover up to CZK 1 000 000 000
• average number of employees up to 250 persons

 

Large accounting units

A large accounting unit is always considered to be a public interest entity and a selected accounting unit, irrespective of the value criteria. Furthermore, a large entity is an entity that exceeds at least two of the following criteria at the balance sheet date:

• total assets in excess of CZK 500 000 000
• an annual aggregate net turnover of more than CZK 1 000 000 000
• average number of employees over 250