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



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




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




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.


CriteriaKind of business

Trade Agricultural and forestry entitiesRevenue > 400 TEURO > 400 TEURO

Assessed taxable value – > 150 TEURO




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



Agenda









Differences between entrepreneurs and companies


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)



Size criteria for companies


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



Size criteria for companies


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.



Agenda









Statutory audit requirements for companies


• Large, mid-size and small public limited companies

• Large and mid-size private limited companies

• Small private limited companies with mandatory supervisory board



Agenda









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



General 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.



Consolidation Requirements


• 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



Consolidation Requirements


• 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



There are no recognition and measurement simplifications for small companies. Small private limited companies do not require statutory audit.

Simplifications for small companies




Agenda









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



Agenda









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



Scope of notes disclosure


• 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



Director’s Report


• 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).

Thank you

road to europe – program of accounting reform and institutional strengthening (reparis) world bank...

Documents