What will amendment to Accounting Act bring?
The draft amendment to the Accounting Act approved by the government will change the categorisation of entities and introduce new obligations regarding sustainability reporting. During the comment procedure, the originally proposed effective date has been postponed to 1 January 2026. However, due to transitional provisions, some of the new rules will apply to preceding accounting periods.
Change in categorisation of entities
Following Directive (EU) 2023/2775, the criteria for determining the category of an entity will be increased as follows:
- For a micro-entity, the threshold for assets has been increased from CZK 9 million to CZK 11 million, for annual turnover, from CZK 18 million to CZK 22 million. The criterion for the number of employees remains at 10.
- For a small entity, the threshold for assets has been increased from CZK 100 million to CZK 120 million, for annual turnover, from CZK 200 million to CZK 240 million. The criterion for the number of employees remains at 50.
- For a medium-sized entity, the threshold for asset has been increased from CZK 500 million to CZK 600 million, for annual turnover, from CZK 1 billion to CZK 1.2 billion. The criterion for the number of employees remains at 250.
- Thus, the thresholds for a large entity are CZK 600 million for assets, CZK 1.2 billion for annual turnover, and 250 for employees.
An entity belongs to a relevant category if it does not fit within the preceding categories and does not exceed at least two of the thresholds as at the balance sheet date. Public interest entities and selected entities are automatically categorised as large entities.
According to the transitional provisions, the new criteria for determining the size of entities should already apply to accounting periods ending after 31 December 2024 (even after the postponement of the proposed effective date, the current wording of the amendment indicates this date, which corresponds to the directive). Among other things, the amendment will influence an entity’s obligation to have its financial statements audited as it automatically applies to large and medium-sized entities, while to other entities, it only applies if certain further conditions are met.
Sustainability reporting
Another significant change brought by the amendment is the gradual extension of the obligation to prepare a sustainability report. This obligation is based on Directive (EU) 2022/2464 of the European Parliament and of the Council and its extension is divided into several phases.
Companies that are already subject to the reporting obligation under the Non-Financial Reporting Directive (NFRD), i.e., all listed companies as well as large companies with more than 500 employees, will prepare their reporting for the financial year 2024 (in the annual report to be published in 2025). In 2026 (reporting for the financial year 2025), the obligation will be extended to all large companies that meet at least two of the following criteria:
- more than 250 employees
- turnover of at least EUR 50 million
- total assets of at least EUR 25 million.
In subsequent waves, the reporting obligation will also apply to small and medium-sized enterprises listed on the stock exchange and to companies outside the EU. Some Czech companies will be affected by the obligation indirectly if they are part of the value chain of companies that will be obliged to report.
In addition to extending the reporting obligation to more companies, the scope of information that companies will disclose about themselves and their value chain will be widened. Among other things, this information will be a mandatory part of the annual report and subject to a limited assurance review.
It is possible that the draft amendment will undergo further changes during the legislative process.