Czech Accounting Standards Research Articles

IPSAS, IFRS, AND THE QUALITY OF THE ACCOUNTING - WITH AN ACCENT ON PUBLIC MANAGEMENT

Are accounting errors caused by national accounting standards? The goal of this paper is to identify the problems with the quality of accounting information when the new Czech accounting standards are used in the public sector. The aim is then to compare the impact of IPSAS and IFRS on the Czech accounting standards and the accounting error rate of private entities and public sector entities. Data analyzed in this paper were obtained in 2018 and 2019. The results of quantitative research are subjected to statistical testing in order to answer the research questions as well as identify differences between profit and non-profit (public sector) organizations. Results indicate that the impact of Czech GAAP on the occurrence of accounting errors is not statistically significant for either business or public sector entities. In addition, according to respondents, the Czech accounting standards after the public finance accounting reform are not considered to be the usual cause of errors in accounting. Actually, compliance with the updated Czech GAAP improves the quality of the financial statements and avoids errors when preparing financial statements. These findings are in line with several existing papers and thus support the existing idea that IPSAS or IFRS application promotes the quality of accounting.

Conflict between the Accounting Act and Czech Accounting Standards in land

The paper deals with the analysis of existing Czech accounting procedures in the case of land accounting. The method of process analysis is used, where the currently valid methodological procedures are examined. The strengths and weaknesses of this methodology are defined. It is found that the accounting and valuation of land according to Czech Accounting Standards is in conflict with the Accounting Act, according to which accounting data should provide a true picture of the status and value of the entity’s assets. The purchase price of the land is entered into bookkeeping and any decrease or increase in value is never accounted for again. In the case of forest land, the value of the land and the value of the plants grown on it are not accounted for separately. The accounting therefore does not provide users with true and current information. The good thing is that these accounting policies do not burden the accounting entity in any way. Furthermore, a proposal for new methodological procedures is presented. According to them, it would be possible to update the accounting data depending on the condition of the land and the development of market prices. Based on an expert opinion, a significant increase or decrease in the current value of the land would be accounted for. In the case of a forest, it would be possible to use analytical accounts to account separately for the condition of the land and the condition of the forest foliage. These new procedures would make it possible to reflect in bookkeeping the actual state of the entity’s assets. However, the disadvantage is the higher financial and time demand. Subsequently, the advantages and disadvantages of the currently effective and proposed methodology are compared.

Evaluation of possibilities and risks in keeping bitcoins in the EU accounting records

Research background: Cryptocurrencies are a specific form of currency that has emerged with the rise of globalization and the Internet. At present, there are still no necessary guidelines to enable bitcoin to be accounted for uniformly, not even within the framework of the international accounting standards IFRS. Purpose of the article: That is to evaluate the possibilities of correct procedure in accounting for bitcoin according to applicable accounting regulations with identification of deficiencies and risks and overall impact on profit and loss statements and tax issues in reporting bitcoin, especially in income taxes and VAT. Methods: The evaluation will be performed using model examples that focus on the use of bitcoin in business. Four model examples: 1. bitcoin as a means of payment, 2. bitcoin extraction, 3. bitcoin speculation, 4. evaluation of bitcoin billing when paying salaries. For individual variants, income tax will be calculated according to valid regulations and any difference will be compared. Based on the synthesis of the obtained results of model examples, the reporting of bitcoin according to Czech accounting standards will be evaluated with subsequent recommendations for accounting entities and pointing out possible risks for reporting. Findings & Value added: If an entity wishes to use bitcoin in the course of its business, it may be advised to create appropriate analytical accounts or off-balance sheet records. This issue should be discussed and addressed in the legislation. This is a global issue, so it is necessary to pay sufficient attention to the uniform approach in accounting.

Relationship between legislation and accounting errors from the point of view of business representatives in the Czech Republic

Research background: Previous studies have demonstrated that providing relevant information to users is positively affected by higher quality of accounting standards and adhering to ethical rules and accounting principles by accounting professionals. On the other hand, there are a lot of cases when the law was broken. The most common reason for committing financial statement´s fraud include in-creasing stock prices, getting loans from bank or avoiding payment of taxes.
 Purpose of the article: The aim of this paper is to evaluate both the relationship between using of legislation and accounting errors rate in the financial statements as well as the possible using of creative accounting from the point of view of enterprises and non-profit organizations in the Czech Republic.
 Methods: Among the quantitative research methods the questionnaire was used. The questionnaires were sent out to randomly 201 selected enterprises and non-profit organization. The survey was conducted from September 2017 to the end of January 2018. The data were analyzed by means of the tools of descriptive statistics and the chi-square goodness of fit test. The research questions sought to investigate whether Czech Accounting Standards helped in all areas of accounting and reporting and avoiding of errors in financial statements, and whether the respondents encountered fraudulent procedures in compiling financial statements.
 Findings & Value added: The results indicated that using Czech Accounting Standards was perceived as a useful tool in solving all situations in areas of accounting and avoiding accounting errors. Moreover, it was proved that the volume and frequency of errors were not significant in financial statements.

The Impact of Accounting Standards Utilisation on Internal Credit Rating

The article addresses the possible impact of utilising different accounting standards used in credit scoring on a client's internal credit rating. This impact is represented in the article by a change in the credit score achieved as a result of the application of data from financial statements compiled based on IFRS, in comparison with the values based on statements compiled under the Czech Accounting Standards [CAS].The intention rests in identifying possible changes of a company's internal credit rating.The objective of this article is to demonstrate changes in the internal credit rating of a company, depending on the utilisation of the financial statements prepared under the Czech Accounting Standards and IFRS.When using data from IFRS statements in credit scoring, lower scoring values were obtained for the companies surveyed compared to the values that were found when utilising data from the financial statements compiled according to the CAS.

Fraud Risk Management from the Perspective of CFEBT Risk Triangle of Accounting Errors and Frauds

The objective of the present contribution is to evaluate the risk of the impact of accounting errors and frauds on reported accounting records on the basis of the CFEBT risk triangle of accounting errors and frauds. The analysis is conducted in the framework of a case study that examines a selected accounting unit predominantly operating in trade, with respect to financial statements reported during the years 2011–2015. The evaluation of the risk of impacts of accounting errors and frauds forms a part of one of the three vertices of the CFEBT risk triangle. The contribution presents results of the CFEBT approach at three levels of the M‑score and analyses significant discrepancies between the generation of earnings and increase in cash flow during the observed periods. The CFEBT risk triangle was designed as a tool for detection, evaluation and management of the risk of accounting errors and frauds in circumstances of the Czech accounting standards and International Financial Reporting Standards (IFRS). The essential aim of the triangle is to reduce information asymmetry between authors and users of accounting records, or, in other words, to increase the quality of available information with respect to decision‑making on the basis of available accounting information.

CFEBT Risk Triangle as a Tool for Detecting and Evaluating Risks of Accounting Records: a Case Study

The objective of the present contribution is to evaluate the risk of accounting errors and frauds in small companies predominantly operating in agriculture. It is based on an analysis of the CFEBT risk triangle for financial statements reported for the years 2012–2016. The CFEBT risk triangle is applied in form of a case study aimed at risk detection of occurrence of accounting errors and frauds for a selected sample of companies. A detailed analysis of a risk of impact of accounting errors and frauds is illustrated in the case study of an accounting unit chosen from the sample of companies evaluated. Results of the presented case study into the detection and evaluation of the risk based on interconnections between the reported profit (loss) and the generated cash flow during 5 accounting periods confirm the significance of having a complex view for decision making of users based on reported accounting records and accounting data. Future research into the CFEBT risk triangle focuses on performance of complex analyses for individual types of business activities of small and middle-sized companies in the context of Czech accounting standards and IFRS.

Valuation of intangible assets according to Czech accounting standards and IFRS in the context of explanatory power of financial statements

Valuation of intangible assets according to Czech accounting standards and IFRS in the context of explanatory power of financial statements

The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from the Czech Republic

The aim of this paper is to characterize the extent to which International Financial Reporting Standards (IFRS) is used as a reference point for national accounting rules in the Czech Republic (CR) and what elements are incorporated in Czech Accounting Regulation, paying particular attention to the latest amendment to the Accounting Act (AA) based on the EU accounting Directive (2013/34/EU). Methods used include analysis of Ministry of Finance documents, interviews with the team members who participated in the new wording of the AA to adapt it to the EU Directive and comparison of current to existing IFRS reporting rules. The results confirm that IFRS implementation in the CR is determined by economic and institutional factors, a major part of which is played by foreign ownership of dominant Czech companies and their subordinate position as subsidiaries of foreign entities and the weak capital market. Implementation of elements of IFRS into Czech accounting standards is still only partial. This process takes place as an integral part of the process of reorientation of the entire economic system toward market principles, which includes the accounting system. Each change of the AA involves some elements of IFRS; however, between the two systems, there are still significant differences, the roots of which lie in a different (continental) model of accounting.

How International Financial Reporting Standards (IFRS) Improve the Financing of SME’s in the Czech Republic

The accountancy management inline with the IFRS provides quality and trustworthy information for financial statement users and provides the comparison with similar companies at international level. The importance of creating the closing financial statements inline with the IFRS grows with the development of cross-border trade, cooperation and competition within the business environment where the prevailing economical element are the small and medium sized enterprises (SME). The support of SME and their bussiness activities at the national and international market is the target of national politics and politics of the EU. To help the international comparison the IFRS for SME and many other programs were created to support the SME funding within the EU. The Czech Republic doesn’t allow to assemble and public the closing financial statement inline with the IFRS. The access to the funds is therefore complicated, the economic indicators show different values when assembling the closing financial statement inline with the IFRS or inline with Czech accounting standards (CAS). The seven SMEs out of different bussiness sectors focusing on cross-border trade are illustrative of the current situation in the Czech Republic.

Comparison of Valuation of Financial Instruments according to the International and Czech Accounting Standards in the Context of Performance Reporting

The paper is devoted to a comparison of the valuation of financial instruments according to the international and Czech accounting standards in the context of performance reporting of trade corporations. Differences in valuation and reporting of financial instruments are examined in connection with the upcoming amendments to the international accounting standards, which are currently the subject of scientific and expert discussions. The research focused on the comparison of classification methods of financial instruments according to the international and Czech standards and the resultant methods of recognition, valuation and reporting with the aim of identifying possible differences. The research arrived at the discovery of what causes the differences and the assessment of their impact on the financial statements of trade corporations. A different concept of accruals on long-term receivables and variant calculations of present value affected the amount of the reported balance sheet as well as performance. Calculations of specific values of differences in financial instruments are made in two model examples in the categories Held-to-maturity investments (HTMI) and Loans and receivables (L&R), both from the viewpoint of owners, as well as from the perspective of debtors. The development of these differences in time is described graphically. The differences in the reported values manifested themselves in overvaluation or undervaluation during the life of the financial instrument, but the values were identical at the time of their maturity. It has been proved that differences between the reported financial situation and the performance of trade corporations persist even after the amendment to the Czech accounting legislation, and it is necessary to take them into account in financial analysis.

Analysis of Possibilities of Detectnig the Manipulation of Financial Statements in Terms of the IFRS and Czech Accounting Standards

The main objective of financial statements is to give information. The diversity of interests and objectives of individual groups of users and creators of financial statements presents the risk of manipulation of financial statements in the context of true and fair view as defined in the national accounting legislation. The paper is concerned with the different possibilities of detecting the manipulation of financial statements in terms of the Czech Accounting Standards and IFRS. The paper analyzes the selected risk detection models of the manipulation of financial statements using creative accounting methods, off-balance sheet financing methods and accounting frauds in specific case studies of selected accounting unit in terms of Czech accounting standards. Based on the analysis and comparison of the results thereof, the paper presents and evaluates the alternatives of users of financial statements to evaluate the risk of manipulation of financial statements beyond the scope of a fair and true view. The evaluation further includes a comparison of uses of these models with respect to the International Financial Reporting Standards.

Analysis of Possibilities of Detectnig the Manipulation of Financial Statements in Terms of the IFRS and Czech Accounting Standards

Analysis of Possibilities of Detectnig the Manipulation of Financial Statements in Terms of the IFRS and Czech Accounting Standards

Komparace zachycování výnosů v České republice a podle IAS/IFRS

Publicly traded companies prepare their consolidated accounts in conformity with the international accounting standards (IAS/IFRS) in accordance with the Regulation No. 1606/2002. This is obliged for all publicly traded joint-stock companies in the Czech Republic. Other companies prepare financial statements in accordance with national accounting standards. There are Accounting Act No. 563/1991 of Coll. and Regulation No. 500/2002 of Coll., Czech Accounting Standards in the Czech Republic. Both systems are based on different principles so there are many differences. The Czech Accounting System (CAS) is based on the rules while IAS/IFRS are based on principles (Kovanicová, 2005). These differences are mainly caused by the different philosophy. CAS prefers the fiscal policy to the economic substance while IAS/IFRS prefere the economic substance. One of the most significant dif­fe­ren­ces is in the field of revenue recording. There are two standards concerning the revenues recording (IAS 18 − Revenue, IAS 11 – Construction Contracts) in IAS/IFRS. CAS 019 – Expenses and Revenue are dealing with the revenue recording in the Czech Republic. The paper is aimed at the comparison of the methodical approaches for revenue recording used by IAS/IFRS and by CAS. The most important differences are caused by the different approach to the long term contracts (construction contracts, software development contracts) revenues recording.

Mezinárodní účetní standard č. 2 - Zásoby a česká účetní legislativa

Cilem předkladaneho přispěvku je hodnoticim způsobem charakterizovat zakladni požadavky IAS 2 - Zasoby na vymezeni, oceňovani a vykazovani te casti zasob, ktera je předmětem jeho řeseni, srovnat je s obdobnými požadavky ceske legislativy a narodnich ucetnich standardů a dat naměty jednak na upravu ucetni legislativy do budoucna, jednak na řeseni některých otazek, přesahujicich ramec legislativniho řeseni, v ramci narodnich ucetnich standardů, popř. jejich interpretaci. Clanek dochazi k zavěru, že IAS 2 - Zasoby je v řadě rysů respektovan a aplikovan i v nasi ucetni legislativě. V některých castech vsak inspiruje k jejimu zpřesněni, a to jak v oblasti pojmove, tak i obsahove a metodicke. Přispěvek v teto souvislosti navrhuje celkem sedm změn ve vymezeni a oceňovani zasob, ktere by měly být do ceske ucetni legislativy, standardů nebo jejich interpretaci zapracovany.

PROBLEMATICKÉ ASPEKTY UKAZATELE EKONOMICKÉ PŘIDANÉ HODNOTY V PODMÍNKÁCH ČR

The EVA indicator has been constructed in the recent past as a reaction to requirements of the new economic environment. As the EVA indicator has been introduced by Stewart Stern & Co. in the early nineties, past two decades many economists have been discussing the pros and cons of EVA application as well as various adjustments needed to calculate some relevant result. A range of attitudes to the adjustments to accounting data towards economic data exist there. As the indicator of economic value added is considered to be a criterion of company’s real economic performance it is necessary to be very careful at applying encouraged adjustments. In this article, the authors compare and discuss these adjustments advised in order to reach some ideal number. Accounting differences of US GAAP, IFRS and Czech Accounting Standards are taken into consideration.

Zkušenosti s odpisovými modely a rezervami na opravy v českých malých a středních podnicích

The article aims to describe the process of gradual convergence of Czech accounting standards with International Financial Reporting Standards. One of the last steps was the introduction of residual value and component depreciation method in the field of accounting and reporting of long-term assets. The aim of the harmonization processes is to ensure comparability of financial statements on an international scale and clarity for users of financial information. Uniform rules for financial reporting lead to the credibility of financial statements to investors and ultimately affect the competitiveness of firms.

Harmonisation efforts in the field of accounting of public sector

Increasing requirements for financial reporting of public sector led to a need to create a system that would provide relevant and reliable information for management of accounting entities of public sector and also to increase the quality of accounting and financial statements of public institutions. The International Public Sector Accounting Standards Board (IPSASB) is therefore creating high-quality financial reporting standards for public sector (IPSAS). Paper points out the ongoing reform of accounting in the field of public finances in the Czech Republic, where there are substantial changes in accounting rules and it also introduces new accounting methods. Regarding the fact that accounting of public sector is nowadays accounting system perhaps with the greatest potential of development, paper highlights the differences in financial reporting in accordance with Czech legislation and IPSAS system. It tries to catch the essential differences that arise from the financial legislation, the accounting basis and also from the content of financial statements. The paper also indicates the difference between Czech Accounting Standards for selected accounting entities that maintain accounts in accordance with Decree No. 410/2009 Coll. and International Public Sector Accounting Standards (IPSAS). There is also recommended approach to the creation of national standards with regard to international harmonization.

The potential to reduce the risk of manipulation of financial statements using the identification models of creative accounting

Explanatory power of accounting information is the key question for deciding of users of financial statements. A whole range of economic indicators is available to the users of financial statements to measure the firm productivity. When the accounting statements (and applied methods) are manipulated, the economic indicators may reveal clearly different results. The users of financial statements should have the possibility to assess the risk of manipulation of accounting statements in time considering potential risk of accounting fraud. The aim of this paper was based on the synthesis of knowledge from the review of literature, the CFEBT model analysis and Beneish Model proposing a convenient model for identifying risks of manipulation of financial statements. The paper summarizes the outcomes of possibilities and limits of manipulated financial statements and their identification. The testing hypothesis is assessing whether there is a close relation of a loss and an increase in the cash flow in 3–5 years time; whether the sum of the amounts for 3–5 year’s time would reveal the same results respectively. The hypothesis was verified on the accounting statements of the accounting entities of prepared case studies respecting the true and fair view of accounting based on Czech accounting standards.

Účetní rezervy podle ČÚS a IAS/IFRS včetně empirické studie vykazování

Rezervy jsou účetní kategorií, jež jsou velmi závislé na odhadech. Z toho důvodu jejich výši ovlivňuje přístup, s jakým se odhad tvoří. Článek prezentuje přístup k tvorbě a vykazování rezerv podle ČÚS a IAS/IFRS. Druhou části článku je empirická studie, která analyzuje vykazování rezerv podle IAS/IFRS v českém prostředí. Článek přináší výzkumná zjištění o vykazování a chybách ve vykazování a zamýšlí se nad možnou inspirací Českými účetními standardy při vykazování podle IAS/IFRS. Pomocí vyhodnocení dílčích oblastí vykazování se snaží vykazování a inspiraci ČÚS zhodnotit.