Survival Kit III. Accounting and Auditing Statutory Financial Statements and Annual Reports

Statutory Financial Statements and Annual Reports

Contents of Statutory Financial Statements

Act on Accounting (Article 18) defines the compulsory contents of financial statements. Further rules and requirements are included in decrees on accounting. For entrepreneurs this relates to decree No. 500/2002, Articles 3–44, Annex No.1 (the balance sheet) and Annex Nos.2&3 (the income statement).

Act on Accounting (Article 14) prescribes specific groups of accounts for a nominal ledger with defined content. Additional rules and requirements in this respect are included in decree No. 500/2002, for entrepreneurs Articles 45 and 46, and Annex No. 4.

Publication and Filing Obligations

Companies can adopt a different financial year end, provided that they inform the Financial Office at least three months in advance (Act on Accounting, Article 3, paragraph 5). The financial statements must be submitted, together with the income tax return, to the Financial Office within the first three months of the next financial year. This deadline is extended to six months for all companies that require an audit or use the services of a registered tax adviser.

Companies that do not require a statutory audit can use condensed notes (Act on Accounting, Article 18, paragraph 4). Additionally, all companies that require a statutory audit must prepare an annual report and make it publicly accessible by filing it with the Commercial Register (Act on Accounting, Articles 21 and 21a). Statutory Representatives of entities controlled by another party must prepare a written report on relations with related parties. This report must be prepared within the period of three months after the end of the reporting period. This report needs to be prepared in accordance with Article 82 of Corporations Act. If an entity has an obligation to prepare an annual report, the report on relations needs to be appended to it.

Decree no. 500/2002 Coll., limits the obligation to publish non-financial information in the annual report of micro-, small- and medium-sized entities. However, for the accounting period from 1 January 2017, there is an additional requirement to provide a fairly detailed description of non-financial information is established in the annual report, the consolidated annual report or in a separate report. This requirement applies only to large companies that are subject to public interest and only if their average number of employees as at the balance sheet date exceeds 500 employees through the period. The same criteria apply to an accounting unit consolidating a large group of accounting units. The fact whether the company prepared and disclosed non-financial information in the annual report, consolidated annual report or separate report is subject to the auditor’s verification. This information is subject to the same rule for disclosure as in the case of annual reports and financial statements.

Moreover, companies with equity or debt instruments traded on public markets are subject to more demanding rules in terms of publishing financial information, mainly in annual reports and through filing interim financial information semi-annually. The semi-annual report includes an interim statement of financial position, statement of comprehensive income and certain additional financial information. This report does not need to be audited. Extended requirements for these companies are defined in Act on Undertakings on Capital Markets, and the Prague Stock Exchange (“PSE”) has its own public filing terms for companies traded on individual markets organised by the PSE. As mentioned above, all companies that have their shares or investment bonds listed on any European regulated stock exchange are required to prepare their financial statements in accordance with IFRS (Act on Accounting, Article 19a, paragraph 1). The annual reports of listed companies have to disclose the remuneration of the Board of Directors and Supervisory Board members and other top executives individually for these three groups.

Basic Accounting Principles Consolidation

Marek Richter – Partner
PricewaterhouseCoopers
Audit, s.r.o.
nám. Svobody 20, 602 00 Brno
+420 542 520 170
marek.richter@cz.pwc.com
Petr Mališ – Director
PricewaterhouseCoopers
Audit, s.r.o.
nám. Svobody 20, 602 00 Brno
+420 542 520 210
p.malis@cz.pwc.com