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Transcript of Road to Europe – Program of Accounting Reform and Institutional Strengthening (REPARIS) World Bank...
Road to Europe – Program of Accounting Reform and Institutional Strengthening (REPARIS) World Bank / European Commission
Accounting by Small and Medium EntitiesSimplified Financial Reporting Requirements: Austria Case Study
Gerhard PrachnerVienna, 15 March 2006
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 2REPARIS
Agenda
Financial Reporting Requirements
Financial Statements
Statutory Audit Requirements
Recognition and Measurement Principles for Companies
Presentation and Disclosure Principles for Companies
Notes and Director’s Report – Simplifications for small Companies
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 3REPARIS
Legal Background of Accounting and Reporting
• Content and form of financial reporting (book keeping) are required by law.
• Regulations for book keeping:
- Austrian Commercial Code (Handelsgesetzbuch, Unternehmensgesetzbuch – Firm Code as of 1.1.2007)
- Austrian Public Limited Companies Act
- Austrian Private Limited Companies Act
- Austrian Income Tax Act
- Austrian Federal Fiscal Procedures Act (AFFPA)
- Value Added Tax Act
Financial Reporting Requirements
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 4REPARIS
Austrian Commercial Code
• Based on 4th and 7th EC Directive
• Every business entity shall keep books and records, in which it shows and explains its business
• Transactions and the financial position according to the applicable “Austrian Generally Accepted Accounting Principles”
• Requirement for book keeping starts with the registration in the Register of Firms
Financial Reporting Requirements
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 5REPARIS
Reporting requirement according to tax law
• Reporting requirement according to tax law, when there is a requirement according to the Austrian Commercial Code or other legal requirement (section 124 AFFPA), or
• excess of limits for book keeping according to section 125 AFFPA:
• The Value Added Tax Act requires entities to keep books substantiating the computation of the value added tax.
Financial Reporting Requirements
CriteriaKind of business
Trade Agricultural and forestry entitiesRevenue > 400 TEURO > 400 TEURO
Assessed taxable value – > 150 TEURO
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 6REPARIS
Financial Reporting Requirements
Requirement to keep books
record keeping requirement according to ACC
entrepreneur according to ACC
other individuals
other business according to AFFPA
professionals
exceed limits of AFFPA
does not exceed limits of AFFPA
voluntarilycash basis
of accounting
double entry book keeping simple book keeping
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 7REPARIS
Agenda
Financial Reporting Requirements
Financial Statements
Statutory Audit Requirements
Recognition and Measurement Principles for Companies
Presentation and Disclosure Principles for Companies
Notes and Director’s Report – Simplifications for small Companies
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 8REPARIS
Differences between entrepreneurs and companies
Financial Statements
Entrepreneurs Companies
Content of financial statements
Balance sheet and income statement
Balance sheet, income statement and notes
Director’s report Not mandatory Mandatory
Statutory audit Not mandatory Mandatory (but not for small private limited companies)
Publication Not mandatory Mandatory (simplified disclosure for small private limited companies)
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 9REPARIS
Size criteria for companies
Financial Statements
Large – mid-size - small
• Small companies are such which do not exceed at least two of the following three criteria:
Balance sheet total: 3,650 Mio Euro
Revenues: 7,3 Mio Euro
Average number of employees: 50
• Mid-size companies are such which exceed two of the above mentioned criteria:
• Large companies are such which exceed at least two of the following three criteria:
Balance sheet total: 14,6 Mio Euro
Revenues : 29,2 Mio Euro
Average number of employees: 250
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 10REPARIS
Size criteria for companies
Financial Statements
Large – mid-size - small
If these criteria are exceeded or not met on the closing dates of two consecutive financial years, the legal consequences of the criteria shall take effect as of the following year.
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 11REPARIS
Agenda
Financial Reporting Requirements
Financial Statements
Statutory Audit Requirements
Recognition and Measurement Principles for Companies
Presentation and Disclosure Principles for Companies
Notes and Director’s Report – Simplifications for small Companies
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 12REPARIS
Statutory audit requirements for companies
Statutory Audit Requirements
• Large, mid-size and small public limited companies
• Large and mid-size private limited companies
• Small private limited companies with mandatory supervisory board
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 13REPARIS
Agenda
Financial Reporting Requirements
Financial Statements
Statutory Audit Requirements
Recognition and Measurement Principles for Companies
Presentation and Disclosure Principles for Companies
Notes and Director’s Report – Simplifications for small Companies
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 14REPARIS
General Principles
Recognition and Measurement Principles
• Austrian Commercial Code contains general measurement rules which apply to all entrepreneurs and companies
- General principles• Consistency, going-concern, conservatism, completeness, single
asset valuation, accrual basis of accounting, materiality- Historical cost principle for non current assets- Depreciation and appreciation for non current assets- Historical cost principle for current assets- Stringent lower of cost or market principle for current assets- Liabilities shall be recorded at the amount to be repaid- Accruals shall be recorded with the amount necessary to settle the
liability. Conservatism has to be taken into account.- Accruals for pensions and other similar obligations shall be recorded
at the amount using actuarial principles
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 15REPARIS
General Principles
Recognition and Measurement Principles
• Austrian Commercial Code does not contain specific recognition rules for revenues, assets and liabilities
• Dependence principles
- Austrian Income Tax Act contains the so called “Dependence Principle” meaning that entities that are registered with the Register of Firms have to use the accounting and reporting principles represented by the ACC for determining taxable income, unless binding tax regulations demand a different approach.
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 16REPARIS
Consolidation Requirements
Recognition and Measurement Principles
• Entities which are managed on a uniform basis by a parent company with its registered office in Austria are required to prepare consolidated financial statements – single economic entity concept
• Control concept as in IAS 27
• But size-dependent exemptions
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 17REPARIS
Consolidation Requirements
Recognition and Measurement Principles
• Consolidation is not required when:- As of the closing date of its financial statements and as of the
preceding closing date at least two of the three following criterias apply
• balance sheet totals of parent and subsidiaries do not exceed 17,52 mio EUR
• revenues of parent and subsidiaries do not exceed 35,04 mio EUR• parent and subsidiaries do not employee more then 250
employees on average over the year- or
• the consolidation balance sheet total does not exceed 14,6 mio EUR
• the consolidation revenues do not exceed 29,2 mio EUR• parent and subsidiaries do not employee more than 250
employees on average over the year
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 18REPARIS
There are no recognition and measurement simplifications for small companies. Small private limited companies do not require statutory audit.
Simplifications for small companies
Recognition and Measurement Principles
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 19REPARIS
Agenda
Financial Reporting Requirements
Financial Statements
Statutory Audit Requirements
Recognition and Measurement Principles for Companies
Presentation and Disclosure Principles for Companies
Notes and Director’s Report – Simplifications for small Companies
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 20REPARIS
General rules for financial statements and director’s report
Presentation and Disclosure Principles
• Content of financial statements, balance sheet, income statement, notes
• Very detailed rules for presentation of balance sheet and income statement
• Detailed disclosure rules for certain items of balance sheet and income statement
• Obligatory disclosure rules for public limited companies, eg class of shares, authorized capital, treasury shares, convertible bonds, etc
• Director’s report- rules about content- is not subject to full audit, only the compliance of the director’s report
with the financial statements must be audited
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 21REPARIS
Agenda
Financial Reporting Requirements
Financial Statements
Statutory Audit Requirements
Recognition and Measurement Principles for Companies
Presentation and Disclosure Principles for Companies
Notes and Director’s Report – Simplifications for small Companies
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 22REPARIS
Scope of notes disclosure
Notes and Director’s Report – Simplifications for small companies
• Large and mid-size public limited companies as well as large private limited companies
- require full disclosure with no simplifications or exemptions
• Small public limited companies and mid-size private limited companies
- no details about revenues in notes such as break down in domestic/foreign revenues, revenues by line of business
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 23REPARIS
Scope of notes disclosure
Notes and Director’s Report – Simplifications for small companies
• Small private limited companies need not disclose
- Time limits of receivables and liabilities
- Fair value of real estate
- Extraordinary depreciation
- Certain disclosures about taxes and deferred taxes
- Certain disclosures about financial instruments
- Break down of condensed items of balance sheet and income statement
- Exploration of material accruals not disclosed separately
- Break down of explanations of commitments and contingencies
Simplified Financial Reporting Requirements: Austria Case StudyPricewaterhouseCoopers
15 March 2006, Slide 24REPARIS
Director’s Report
Notes and Director’s Report – Simplifications for small companies
• No director’s report for small private limited companies
• No details about non financial KPIs for mid-size companies
© 2006 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).
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