CZECH REPUBLIC

ACCOUNTING SYSTEM
Group member:
Nguyen Anh Tuan
Nguyen Hong Anh
Nguyen Khanh Huyen
Tran Nam Vuong
Nguyen Ngoc Anh

TABLE OF CONTENT
1

Back ground

Accounting profession

Accounting principle

Comparing Czech GAAP and IFRS

Czech accounting issues

1. BACKGROUND
The Czech economy returned to growth
in 2014
GDP growth picked up to 2.3 %
Average inflation rate is 0.35%

1. BACKGROUND

SOURCE:
http://ec.europa.eu/

1. BACKGROUND

SOURCE:
http://www.inflation.eu/

1. BACKGROUND
The Czech Republic has been a EU member
since 2004
Tariff rate: 1%
The major change was the adjustment
made by the Act No. 437/2003 Coll. and
Act No. 410/2010 Coll.
Further clarification of conditions and
procedures for consolidation of financial
statements.

1. BACKGROUND
- The Czech Republic's public finance outturns have
improved markedly, but some issues remain in the
areas of taxation, fiscal sustainability and the fiscal
framework.
High level of tax evasion, particularly in the areas
of VAT
Tax collection remains costly
Tax revenue relies heavily on taxation of labor
income.
The scope of numerical fiscal rule and medium-term
budgetary planning is limited and enforcement has
been weak

2. ACCOUNTING
PROFESSION
The rule and regulation is set out in Act
no.593/1991 or Accounting Act
The Decrees of the Ministry of Finance of
the Czech Republic (MF CR) issued for
each type of organization, the MF CF
decide and describe for each

2. ACCOUNTING
PROFESSION
Profession organizations :
Chamber of Auditors of the Czech
Republic
(Komora
auditoru
Cesk
republiky (KACR))
Union of Accountants of Czech Republic
( Svazetnch)
The
all
encompassing
National
Accounting Council

2. ACCOUNTING
PROFESSION
Accounting guide for SMEs published in
2011. Sections cover:
size criteria
different types of business
accounting records
accounting principles
annual
accounts
and
financial
statements
auditing, disclosure and publication.

2. ACCOUNTING
PROFESSION

Czech companies must applied IFRS to

prepare consolidate and consolidated
financial statements
Profile prepared by the IFRS Foundation
about use of IFRS in Czech with notes on:
commitment to global financial reporting
standards
extent of IFRS application
IFRS endorsement
translation of IFRS
application of IFRS for SMEs.

3. ACCOUNTING
PRINCIPLES
All listed companies are required
financial statement following IFRS
The other companies are required to
apply Czech Accounting Rule ( or
known as Czech GAAP)

3. ACCOUNTING
PRINCIPLES
Czech GAAP includes :
Accounting Act
The Decrees on Double -Entry
Accounting
The Czech Accounting Standards
Changes in Czech GAAP have move
closer to IFRS

3. ACCOUNTING
PRINCIPLES
Common accounting policies followed in
the Czech Republic include (1):
Fixed assets are stated at acquisition cost
and are depreciated over their expected
useful
lives
in
accordance
with
accounting methods.
There is an option to value investments
at amortized cost or at fair value.

3. ACCOUNTING
PRINCIPLES

Common accounting policies followed in the

Czech Republic include (2):
Inventory should be valued at the lowest
of cost or net realizable value. The last-in,
first-out (LIFO) method is not permitted.
Goodwill is amortized over 60 months
from the date of acquisition.
Any difference between the purchase
price and the net book value can be
booked as a valuation difference and is
amortized over 180 months.

3. ACCOUNTING
PRINCIPLES
Common accounting policies followed in
the Czech Republic include (3):
Both realized and unrealized exchange
gains and losses relating foreign
currency are recognized in the profit and
loss account.
Under Czech accounting legislation,
there is no concept of finance leases

4. COMPARING CZECH GAAP

AND IFRS
IFRS
Reporting
Requires the
currency
measurement of prot
using the functional
currency; however,
entities may present
nancial statements in
a different currency.
Balance sheet Does not prescribe a
format
particular format.
Income

statement
format

GAAP
Only the
Czech
currency.

A standard
format
(structure)
is
prescribed.

4. COMPARING CZECH GAAP

AND IFRS
IFRS
GAAP
Nonconsolidation
of
subsidiaries

Acquired
intangible
assets

All subsidiaries
must be
consolidated.

If the subsidiary is
acquired and held
for sale within one
year or (rarely) if
there are long-term
limitations
preventing the
exercise of control.
Intangible
Amortize over their
assets with
useful life.
indenite useful Revaluations and
life are tested
indenite life are
for impairment not permitted.
annually.
Revaluations

4. COMPARING CZECH GAAP

AND IFRS
Czech tax legislation does not allow
using profit or loss stated according
to IFRS to calculate the income tax
Companies willing to report under
IFRS must therefore prepare two
sets of financial statements.

5. ISSUES OF IFRS APPLICATION

There are 2 large issue in Czech:

- The aim of business when
applying IFRS
- The impact of taxation

5. ISSUES OF IFRS APPLICATION

a) The aim of business when applying IFRS
-) 16% use IFRS and GAAP at the same time
-) 2% use only IFRS
-) This proportion slowly increases. There is
limited and slow conversion process to
IFRS.

5. ISSUES OF IFRS APPLICATION

- There is no unified method or requirement
to conversion to the IFRS.
Large company: based on demand
Small company: based on compulsory
- Before 1990: The united system of socioeconomic information was closely
associated with central planning
- Same background as other country in Euro

5. ISSUES OF IFRS APPLICATION

b) The impact of taxation
- Czech companies always have to use the
Czech accounting standards for tax
purposes.
- Decree No. 500, 501 and 502: To
determine the tax base is based on
The result (profit or loss), and always
without the influence of international
accounting standards, for taxpayers who
keep accounting records.. (i.e. Decree No.
500, 501, 502).
The difference between revenues and

5. ISSUES OF IFRS APPLICATION

The demand for IFRS is not high and have to
use 2 method at the same time.
(IAS 16) accounting depreciation is provided
under the terms of the business entity to the
contrary of tax determined depreciation.
However, there is an obligation to determine
the tax base for taxation purposes in
accordance with tax regulations).