As we have said in the previous issue of our newsletter, we have prepared a new series on items in the profit and loss account. We are now coming with a pilot article, which reacts to the changes that occur every year in legislation, including accounting. The year 2016, for example, was a year of relatively large changes in accounting. These changes were reflected both in the accounting act no. 563/1991 Sb., and in the decree no. 500/2002 Sb. The category of accounting entities was thus newly defined, for example, and the term of single-entry accounting was reintroduced. In this article, we would mainly like to focus on changes in accounting for costs and revenues in the year 2016 and 2017.

The first important change, which we would like to point out, relates to accounting for extraordinary costs and revenues.  Beginning in the year 2016, the amendment of accounting regulations cancelled separate posting of extraordinary costs and revenues. Instead of them, the accounts 548 – other operating costs, 568 – other financial costs and in the case of revenues analogically the accounts 648 and 668 – other operating or financial revenues, respectively, are newly being used. While in the year 2015, accounting to the account 588 was made in case of operations quite extraordinary in respect to common activity, for example in case of sale of a commercial establishment, now a change in inventory and activation is posted in group 58. Group 68 has so far remained without specific assignment.

The novelties in accounting for changes in inventory of own activity have thus affected all manufacturing companies. From the originally used accounts of group 61, it was thus necessary to readjust accounting software to group 58. Although the adjustment may at first appear to be rather of “administrative” nature, the new way of accounting has an effect on the reports of companies, and especially also on the criteria related to categorising accounting entities or the calculation of limits for statutory audit. This is because group 61 was previously included in the calculation of the value of turnover. A similar procedure has been chosen for booking activation, but even activation is no longer calculated in turnover and it is booked in the accounts of group 58.

Another important change, which we would like to mention in this article, is the change, which relates to accounting on donations. The donations received were previously booked in account 413 Other capital funds. This established procedure is being changed by the amendment coming into effect. Donations are newly posted as other operating revenues in group 64, and if they are financial donations in group 66.

The last change, which we would like to draw attention to, is a minor one, but we consider it important to mention it at least briefly. It is the amortisation of goodwill. Until the year 2015, the maximum time for goodwill amortisation was set at 60 months. With the amendment, a stipulation has come into operation, though, which enables a company to decide that goodwill will be amortised for a longer period, reaching 120 months at maximum, however.

For financial statements for the year 2016, new state reports have been prescribed.  It is important to represent data from the past period correctly in them, too. If you were not sure about the transfer of data in new reports, the Czech Accounting Standard no. 024 may be of help to you. Changes in accounting legislation in 2017 practically do not relate to the area of costs and revenues. 

In case of any questions regarding the above, please turn to us.

Authors: Zbyněk Švejcar and Klára Honzíková