Consolidation of accounting data enables a comprehensive view of the entrepreneurial group of persons unaffected by mutual internal relationships.
Such a view is useful not only for the persons managing this group, but also for external users of the financial statements. Legislation sets out the rules on who is affected by the obligations relating to consolidation. These people form a group wider than what is assumed by many entrepreneurs.
In this article, we present in a simplified form those persons who must prepare consolidated financial statements and those who are exempt. Next time we will look at the specific obligations of the persons concerned.
The obligation to consolidate applies to those accounting entities that are trading companies and, at the same time, controlling companies.
At the same time, the following entities do not have to consolidate
1. a group of accounting units considered to be small (does not meet more than one of the following criteria, which are already calculated on a consolidated basis):
- the amount of the group’s net assets is higher than CZK 100 million,
- the turnover is higher than CZK 200 million,
- the average annual number of employees of the group is higher than 50.
2. a company whose controlled subsidiaries are individually and in the aggregate insignificant and as a result the consolidated financial statements would not differ much from the parent company’s financial statements
3. a company that holds shares in other companies solely for the purpose of selling them
4. a company that is included in the consolidation group of another person (domestic or foreign) and if that person
a) holds all of its shares,
b) holds at least 90% of its shares and the non-preparation of consolidated financial statements has been approved by the other shareholders
c) holds less than 90% of its shares and shareholders holding at least 10% have not requested the preparation of consolidated financial statements
while meeting these conditions at the same time:
- the consolidating entity must follow the law of a member state of the European Union,
- the company itself and the companies controlled by it must be part of a higher consolidation unit,
- the consolidated financial statements and the consolidated annual report must be certified by an auditor in accordance with the law of the country governing that other consolidating entity,
- the consolidated financial statements, the consolidated annual report and the auditor’s report must be published in the Collection of Documents in the Czech language,
- in their individual financial statements, companies must identify the trading company that provides the consolidation and state the reason why it does not carry out the consolidation itself.
This exemption cannot be used by a consolidating accounting entity that is an issuer of investment securities accepted for trading on a European regulated market.
If you are uncertain whether the company is subject to obligations related to consolidation, we recommend consulting the specific case with experts.