Consolidation and reporting

Pursuant to the Accounting Act, consolidated financial statements have to be prepared by a company that is the controlling entity, with the exception of controlling entities that exercise joint influence.

In performing an audit or review of reporting packages, we follow the requirements and deadlines as specified by the parent company for the clients that have to be part of consolidation.

The criteria for mandatory consolidation will be as follows from 1 January 2016.

From 2016 on, consolidation groups will be classified into the following categories if two of three criteria will be exceeded as of the balance sheet date:

1)      Small group of entities: Not exceeding assets of CZK 100 million, turnover of CZK 200 million and the headcount up to 50 employees on the consolidated basis – this group shall be relieved of consolidation in general. Exceptions include groups where one of the group entities is a public interest entity or meets the general exceptions from the consolidation obligation specified below.

2)      Medium-sized and large groups of companies are obliged to prepare consolidated financial statements. These include any and all groups that exceed two of the three criteria specified for a small-sized group of companies.

Exceptions from the consolidation obligation:

The consolidating entity shall not be obliged to prepare consolidated financial statements if:

  • The consolidating entity only controls the consolidated entities that are immaterial, both on an individual and aggregate basis.
  • At least one of the following conditions is met:
  1. Information necessary for the preparation of the consolidated financial statements in compliance with law cannot be obtained without unreasonable costs or without an undue delay in exceptional cases;
  2. The investments in the entity have been held exclusively for the purpose of resale; or
  3. Serious and long-term restrictions substantially prevent the consolidating entity from exercising its rights in terms of dealing with assets or management of the entity, or the execution of consistent management of the entity.

 

In preparing consolidation, it is necessary to define the consolidation group, determine the consolidation methods, harmonise the accounting methods applied by the consolidation group companies or to made necessary modifications so that the methods are aligned for the consolidation purposes.

Are you uncertain as to whether you are obliged to consolidate? Do you need to have consolidation procedures adjusted? Do you need to have your consolidated financial statements reviewed? We will be happy to advise you or perform the consolidation’s audit.

The criteria for the obligation to consolidate until 31 December 2015
The consolidating entity shall not be obliged to prepare consolidated financial statements if the consolidating entity and the consolidated entities together, on the basis of their respective financial statements, did not meet at least two of the following criteria at the end of the balance sheet date of the accounting period:

  • The total amount of gross assets is greater than CZK 350,000,000;
  • The total annual net turnover is greater than CZK 700,000,000; and
  • The average re-calculated headcount, including the employment of a coop member, identified in the way specified on the basis of a special legal regulation, is more than 250 employees during the accounting period.

The above-provided criteria do not apply to banks, companies engaged in insurance or reinsurance activities, and companies that issue securities accepted for trading in the European regulated market.

 

 

Want to know more? Contact us.