Changes in accounting from 1 January 2022

EXPANSION OF THE PUBLIC PART OF THE REGISTER OF FINANCIAL STATEMENTS

Under the Accounting Act currently in force, entrepreneurs are required to submit their financial statements electronically via the portal of the Financial Administration (Finančná správa). From 1 January 2022, this obligation will also apply to other legal entities, such as land communities, non-governmental non-profit organisations, civic associations, associations of owners of flats and non-residential premises, interest associations of legal entities and others. All financial statements filed after 1 January 2022 will be published in the public part of the register, including those filed for previous years. The financial statements of entrepreneurs who are individuals and of branches of foreign persons will not be published in this public part of the register of financial statements. The purpose of this amendment is to automate the processing of financial statements and to eliminate the errors that come with paper forms.

ANNUAL REPORT FOR NON-PROFIT ORGANISATIONS

The Accounting Act currently in force sets out the content of the annual report mainly for entrepreneurs, municipalities and public administration bodies. The mandatory elements of the annual report for non-profit organisations are not clearly defined in the law. This concerns those non-profit organisations that are required to have their financial statements audited because their income from the 2% income tax assignment exceeds €35,000.

From 1 January 2022, the content of the annual report of these non-profit organisations will be governed by Section 20(16), under which the annual report is to contain:

• the financial statements for the accounting period for which the annual report is prepared,
• the auditor’s report on these financial statements,
• an overview of the activities or projects carried out during the accounting period, stating how they relate to the purpose for which the accounting entity was established,
• an overview of revenue broken down by source and an overview of costs broken down by individual type of activity, purpose or project,

CHANGES TO FINES FOR BREACHES OF THE ACCOUNTING ACT FROM 1 JANUARY 2022

From 1 January 2022, the amendment to the Accounting Act proposes the following changes to the imposition of fines for administrative offences:

• to set a lower limit for the fine for a serious breach of the Accounting Act, which is not set in the current wording of the law. The proposed lower limit of the fine for a breach of the Accounting Act is €1,000. This would mean that a serious breach of the Accounting Act, such as failing to keep accounts, failing to prepare financial statements, or concealing and failing to record facts that are subject to accounting, would be punishable by a fine ranging from €1,000 to €3,000,000.
• To set a sanction for breaching the provisions on the retention and protection of accounting records, for example failing to file the financial statements in the register.
• To set a sanction where the last statutory body, or member of the statutory body, registered in the Commercial Register (ORSR) before a commercial company or cooperative is deleted from the Commercial Register fails to fulfil its obligation to retain the accounting records.
• To set the amount of the sanction where the accounting entity fails to fulfil its obligation to file the accounting document in the register and the tax office does not have financial statements from which the amount of the sanction could be calculated based on the value of the assets

MANDATORY ELEMENTS OF AN ACCOUNTING DOCUMENT AND HOW THEY CHANGE FROM 1 JANUARY 2022

For businesses keeping double-entry bookkeeping, the amendment to the Accounting Act proposes to abolish the requirement to state the accounts to which a transaction is posted, unless this follows from the software. However, the accounting entity will still be required, at the request of the tax office during an inspection, to provide access to its accounting software and to accounting records showing the accounts to which the transactions are posted. As part of the digitalisation of accounting, it will be possible to replace the signature of the person responsible for carrying out the transaction with electronic data interchange or an internal control system. In practice, this will mean that if a business decides to keep its accounting records electronically, the signature of the person responsible for carrying out the transaction will no longer be one of the mandatory elements of an accounting document.

ADDITIONS AND ADJUSTMENTS TO THE CONDITIONS FOR ELECTRONIC ACCOUNTING FROM 1 JANUARY 2022

As the number of electronic accounting records used in practice is growing, the amendment to the Accounting Act supplements and specifies the conditions that an entrepreneur must comply with when processing accounting records. This means that Sections 31 to 33 of the Accounting Act will be entirely replaced by a new wording in line with the proposed changes. The main changes are as follows:

• the provisions on the paper and electronic form of an accounting record will be clarified and simplified,
• the possible ways of transforming an accounting record when its form changes are set out anew,
• to transform an accounting record from paper to electronic form, scanning may be used in addition to authorised conversion, which will significantly simplify this process,
• a handwritten signature may be replaced by any electronic signature, provided that the person who created the signature record can be clearly and demonstrably identified,
• accounting records may be processed and exchanged within an accounting entity or between accounting entities in the form of electronic data interchange via an application program,
• when the financial statements are audited or during a tax audit, the accounting entity must provide access to its accounting software and use its accounting records to show the accounts to which the transactions are posted (if it keeps double-entry bookkeeping),
• the accounting entity must retain accounting records in electronic form and submit them in that form to authorised persons (if it keeps them in electronic form).

However, do not forget that the entrepreneur must not breach, and must comply with, the requirements for an accounting record, which include the authenticity of origin, the integrity of content and the legibility of the accounting document from its creation until the end of the period for which it must be retained. The entrepreneur is also required to draw up an internal regulation setting out the system for retaining accounting records. The choice of storage in which the accounting records will be kept is up to the entrepreneur.