Accounting and financial reporting

motiv článku - Accounting and financial reporting The text summarises compulsory duties - related to accounting and audit - needed for running business in the Czech Republic.

Legal requirements

Legal regulations regarding accounting and audit in the Czech Republic are in compliance with the legislation of the European Community. The Accounting Act and the related implementing provisions define the extent of keeping the accounts, and specifically: defining accounting units, subject of accounting, method of accounting, period of keeping the accounts, responsibilities and obligations when keeping accounts, definition of accounting documents, accounting entries, accounting ledgers, requirements regarding the content and form of the financial statements and consolidated financial statements, methods of publication, the duty to have financial statements verified by an auditor, the option and obligation of using the International Accounting Standards, the obligation and methods of appraisals of property and liabilities, stock taking and filing accounting records.

The implementing decrees of the Ministry of Finance of the Czech Republic and the Czech Accounting Standards are also important, as they specify the obligations of the individual accounting units.

Only the so called accounting units are obliged to keep accounts. These are above all:

  • a) all legal entities with their seat in the territory of the Czech Republic,
  • b) foreign legal entities and foreign units that are under the law under which they are based or established considered accounting units or they are obliged to maintain accounting records, provided that they operate business or other activities in accordance with special regulations,
  • c) natural persons – entrepreneurs entered in the Commercial Register,
  • d) other natural persons – that are entrepreneurs and their turnover in the last calendar year exceeded the amount of CZK 25,000,000, as well as all entities who have voluntarily decided to keep the accounts or that are obliged to maintain to keep the accounting in accordance with special regulations.

Moreover, some companies are obliged to keep the accounts and complete financial statements according to the International Accounting Standards. These are companies who issue securities registered in the regulated securities market in one of the member states of the European Union.

The Act on Auditors regulates above all the position and activities of auditors and the conditions under which auditor services can be provided.

Many entrepreneurs outsource external partners for their accounting, either in part - for instance for salary administration, or for the entire accounting service.

Verification of the financial statements by an auditor

For the following accounting units the Act stipulates the duty to have ordinary, as well as extraordinary financial statements verified by an auditor. These are above all:

  • Joint stock companies, if they, at the end of the balance sheet day of the accounting period for which the financial statements are verified, and the immediately preceding accounting period, exceeded or already reached at least one of the three criteria below:
    • Assets of more than CZK 40,000,000
    • Annual net turnover of more than CZK 80,000,000
    • Average calculated number of employees during the accounting period of more than 50
  • Other commercial companies and cooperatives, if they, at the end of the balance sheet day of the accounting period for which the financial statements are verified, and the immediately preceding accounting period exceeded or already reached at least one of the three criteria above.

Administrative procedures

Requirements regarding financial statements

The financial statements represent an indivisible area which consists of: the balance sheet, profit and loss statement, and appendix. Financial statements can also include cash-flow and an overview of changes of equity capital. Financial statements are compiled as at the balance sheet day. The accounting units obliged to carry out audit also compile an annual report. The financial statements and the annual report are published in the Commercial Register. Accounting units are obliged to archive statements and annual reports for at least 10 years. The duties of entrepreneurs regarding accounting are specified in the Czech Accounting Standards.

Resources

The following governmental and non-governmental institutions and web portals offer more information and useful services.

Personalised help and advice

The link below offers information on tax consulting.

The Enterprise Europe Network is an extensive network (with 600 host organisations and 4,000 full-time staff) providing information and advice to entrepreneurs through its local partners.

Document created in co-operation between Your Europe - Business (EU portal for companies) and BusinessInfo.cz.