An accounting entity that keeps accounting books is required to prepare financial statements. However, they must be prepared in different scopes and extents, depending on the size of the company, and we say that a company prepares full or condensed financial statements. Unless the Accounting Act states otherwise, only those entities that are not required to have their accounts audited may prepare condensed financial statements.
Each financial statements are an integral whole and must consist of at least a balance sheet, a profit and loss statement, and an annex that explains and supplements the information contained in the previous two statements. In order to comply with the full scope requirement, the cash flow statement, the statement of changes in equity, and the annual report are also required.
The financial statements are one of the essential and comprehensive information about the company, which are available to a wide range of users from banks, investors to the tax administrator. Their aim is to provide information not only on the economic results for the relevant accounting period but also on the state of assets and liabilities of the company. As stipulated by the law, the information in the financial statements must be reliable, comparable, and understandable and shall be judged from the point of view of materiality.
In case the company is affected by the consequences of the war, it should describe in detail the impact of the war on its economic situation in an annex or in the annual report, even if there were no significant effects on the company's operations and continuity.
The most common negative impacts of war, which must be described in the attachment, include:
Affected areas in accounting:
The first step of the financial statements is an inventory. It ascertains the actual balances of assets and liabilities and records them in the inventory reports. All components of assets and liabilities are subject to inventory. Accounting units may commence the inventory no earlier than four months before the balance sheet date, and complete the inventory no later than two months after the balance sheet date. Accounting units are obliged to prove the inventory for a period of 5 years after the inventory has been carried out in accordance with Section 29(3) of Act 563/1991 Coll. on Accounting.
Inventory can be physical – determining the actual balance of assets by counting, measuring, and weighing (i.e. stocks and cash in the till). Based on the findings is prepared the physical inventory list. Identified inventory differences, i.e. surpluses and shortages, are recorded by the accounting entities to the accounting period for which the inventory verifies the state of the assets.
Further, the documentary inventory is used to find out the actual state of assets and liabilities for which physical inventory cannot be performed, such as receivables and payables. The actual state shall be ascertained on the basis of primary documents and by preparing schedules of the individual components of assets and liabilities.
The financial statements also include a final review of accounting books and recording of specific cases as of the balance sheet date. The most common closing operations are:
According to §39, the annex to the financial statements should provide additional information:
The accounting for the current financial year shall take into account, at the balance sheet date, the effect of events that occurred to the entity between the balance sheet date and the time the financial statements are prepared. Such information shall be disclosed that could affect the judgment of the reader.
Entities shall present comparative information in the current financial statements that is derived from previous financial statements but shall adjust that comparative information if the change contributes to the comparability of the current and comparative information over time. If adjustments are made to the comparative figures and, therefore, the comparative figures in the current financial statements differ from the original figures in the previous financial statements, the entity shall provide a schedule of all significant changes in the annex. That schedule shall include, as a minimum, the before-change, after-change, and commentary.
We would like to remind you that small and micro-accounting entities that are not required to have their financial statements audited are not required to publish a profit and loss statement unless a specific legal regulation imposes this obligation on them. If an entity presents selected data from its financial statements, it shall indicate that these are only selected data from the financial statements and information on where the financial statements are available. Other entities are required to disclose all of the balance sheet, the profit and loss account, the annex and, if audited, the annual report and the auditor's report.
As described above, there are many closing transactions and the requirements for the annex to the financial statements and nothing should be forgotten otherwise there are significant penalties. Should you need our assistance and help in these areas, we are fully at your disposal.
Updated on 13 January 2023
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