The latest accounting news from 1 March 2024

Along with the adoption of Act No. 309/2023 Coll. on Conversions of Companies and Cooperatives and on Amendments to Certain Laws, about which we informed you in our previous Article (hereafter referred to as the "Act on Conversions"), the related provisions of Act No. 431/2002 Coll. on Accounting as amended (hereafter referred to as the "Act on Accounting") have been amended, as well.

Today's Danovky discusses certain changes and amendments:

• The amendment reflects the definitions included in the Act on Conversions. A collective term for a merger, amalgamation into a separate entity, and demerger is now "conversion" or "cross-border conversion."
• In the event of conversion/cross-border conversion, the legal successor, which is not a newly formed accounting entity, is required to again reassess its classification into size groups as of the decisive date.
• In accordance with the Act on Conversions, it has been defined how to determine the decisive date for the purpose of accounting. The decisive date shall be the date from which acts done by companies being wound up are treated for accounting purposes as being done on behalf of the successor company, and the date may be determined retroactively at the earliest as of the first day of the accounting period in which the draft conversion project is prepared, provided that the financial statements prepared as of the date preceding that date was not approved by the relevant body; in the event of a spin-off, this takes effect solely with respect to the assets and liabilities that are to be transferred to the successor companies under the draft conversion project.
• In the event of a cross-border change of the legal form, where the registered office is transferred to another destination state, the company or cooperative will be deleted from the Commercial Register. As of that date, the company or cooperative will cease to exist as an accounting entity. It is therefore necessary to close the accounting books, prepare financial statements, and file the financial statements in the Register of Financial Statements.
• In the event of a change of the legal form (other than referred to in the previous section), the accounting entity shall prepare interim financial statements to the extent as referred to in Article 18 of the Act on Accounting as of the date preceding the effective date of the change of the legal form.
• The principle of valuation applicable to mergers, amalgamations into a separate entity, and demergers, as defined in the Act on Accounting currently in force, shall continue to apply.
• An accounting entity being wound up is required to value assets and liabilities at their fair value as of the date preceding the decisive date.
• In the event of a spin-off, valuation at fair value shall only be made with respect to assets and liabilities representing part of the capital of the accounting entity being divided by spin-off which have been taken over by the successor accounting entity.

The amendment will enter into force on 1 March 2024.

According to the transitional provisions, the provisions of the Act on Accounting in the wording effective until 29 February 2024 shall be used to account for winding up without liquidation in the event of a merger, amalgamation into a separate accounting entity or demerger where a draft merger agreement, a draft agreement on amalgamation into a separate accounting entity, and a draft demerger project, respectively, was approved prior to 1 March 2024.