Annual Report in Czech Republic

The annual report is a critical document prepared by an accountant that provides a comprehensive view of the business activities of an organization. This document not only reflects the financial results for the past financial year, but also provides important non-financial data, including an overview of operating activities, strategic initiatives, and the company's long-term goals.

The preparation of an annual report in the Czech Republic is not just a formal requirement, but an important management tool that helps to increase the success and reputation of a company. In the Czech Republic, the obligation to publish an annual report is regulated by numerous laws and regulations, which help ensure transparency of companies and their responsibility to shareholders, employees and the general public.

Legal regulation of companies in the Czech Republic

The legal regulation of corporate activity in the Czech Republic provides strict requirements for the preparation and publication of the annual report, based on several key regulations. Act No. 563/1991 Coll., on accounting, establishes the obligation for accounting entities to prepare an annual report reflecting the financial position and results of their activities. Additional regulation is provided by Act No. 90/2012 Coll., on commercial corporations, which sets out additional obligations for commercial entities.

According to Section 21 of the Accounting Act, the annual report must include information that enables interested parties to obtain a fair view of the financial position and business activities of the organization. This information must be consistent with the information presented in the financial statements and include:

• Financial performance and asset status;
• Significant events that affect the activities of the organization;
• Strategic plans, economic and social development;
• Analysis of last year's activities and forecasts for the future.

A comprehensive audit of the annual report by auditors is a mandatory requirement to ensure the transparency and reliability of the data presented.

Contents of the annual report for a Czech company

The annual report of a Czech company is a fundamental document that serves to present the organization's activities in a comprehensive manner. This document, which acts as a corporate "business card", covers not only the standard requirements of the Accounting Act, but also provides additional information processed with a high degree of accuracy.

The value of the annual report for users of financial statements is particularly high, given that the content of the document is audited in the case of audited accounting units. However, unaudited accounting units are also required to prepare an annual report in accordance with the requirements of, for example, business agreements with banking institutions.

The structure of the annual report is regulated by the Law on Accounting and includes the following main sections:

• Financial part: presentation of financial statements, auditor's report and analysis of financial results for the reporting period.
• Information after the closing of the reporting period: data that is key to assessing the current position of the company.
• Activity Report: a breakdown of key projects and initiatives implemented during the year.
• Development Prospects: an overview of strategic goals and plans for the future.
• Social responsibility: a description of the company's efforts in the areas of social responsibility, ecology and labor relations.
• Specific information in accordance with legislation: for example, under the Business Corporations Act.

The annual report plays a critical role in communicating not only the financial health of the company but also its strategic direction, innovation and social activities to stakeholders including management, investors, employees and the public. This document serves not only as a source of information but also as a tool for making informed strategic decisions for both investors and analysts.

Approval of the annual report for the Czech company

Approval of the annual report is an important stage of corporate governance for companies in the Czech Republic. The annual report, along with the financial statements, requires formal approval by the company's statutory body, which is usually represented by its executive body. This approval must be completed within the statutory deadline, which is six months after the end of the reporting period.

This process not only ensures the legal validity of the information provided, but also confirms the management team’s responsibility for the accuracy and completeness of the data reflected in the annual report. Approving the annual report in this way helps maintain transparency and trust between the company and its stakeholders, including shareholders, investors, creditors and other market participants.

Publication of the annual report for the Czech company

Publication of the annual report for companies in the Czech Republic is subject to strict rules, depending on the audit status of the accounting entity. For audited accounting entities, the requirement is that the annual report must be published within 30 days of its audit and approval by the statutory body. However, there is an obligation to publish the report no later than the end of the following reporting period, regardless of the completion of the above processes. It is important to emphasize that publication of unaudited information is not permitted for audited entities.

Unaudited accounting units are also required to publish their financial statements before the end of the following reporting period. Individual accounting units are generally required to submit their annual report to the Czech National Bank, which in turn publishes these data in the Official Gazette.

The publication of financial statements and annual reports is carried out by posting data in a collection of documents, with the provision of documents often taking place electronically through specialized data mailboxes.

Annual reports are complex documents that contain many pages of graphs, photographs, and other graphic elements, making them an important tool for informing external users who make economic decisions based on the information presented.

There are special conditions for accounting departments in bankruptcy proceedings that may be exempt from the obligation to prepare an annual report unless a decision is made by the creditors' committee on the need for an audit. These conditions apply for 36 months from the onset of the consequences of bankruptcy, in the case of the previous day of approval of a reorganization plan or in the event of bankruptcy being cancelled due to insufficient assets of the debtor.

Minimum Contents of the Annual ReportCzech company

The annual report of Czech companies must contain comprehensive information prescribed by § 21 of the Accounting Act in order to achieve its objectives. Here are the minimum requirements for the content of the annual report:

a) Events after the reporting date: Includes information about significant events that occurred after the close of the reporting period that could materially affect the operations or financial condition of the company. These may include asset sales, loan agreements, and bankruptcy or liquidation events that are not reflected in the financial statements.

b) Expected development of activities: Describes the company's prospects and strategic plans, including new products, technologies, market positions, and upcoming investments. Also discussed are employment plans, key financial indicators, and their trends.

c) Research and development activities: Should be reflected in the report, showing how development costs are treated on the balance sheet or written off to the current period, depending on the nature and expected usefulness of the research results.

d) Environmental protection and labor relations: Includes information on employment, age distribution of employees, training programs, and use of social funds. It also describes the company's efforts in the field of ecology and participation in social projects such as health care, charity, and culture.

d) Foreign branches: The presence and status of foreign branches or other structural divisions of the company must be indicated, taking into account the changes in terminology introduced by the Civil Code (Law No. 89/2012 Coll.), where the term “organizational component” is replaced by “branch of the enterprise”.

These elements ensure that the annual report provides a complete picture of the company's performance, promoting transparency and keeping stakeholders informed.

FAQ

1. What information should the annual report of a Czech company contain?

The annual report of a Czech company, according to Act No. 561/1993 Coll., "Accounting Act", is a mandatory document for a number of accounting entities. The main requirements for entities that must prepare and publish an annual report include:

1. Large accounting entities: This includes large companies that are not objects of public interest.
2. Average accounting units: Medium-sized companies that meet certain size and turnover criteria.
3. Small accounting entities: This applies to small companies that are not joint stock companies or special purpose funds and that, at the reporting date, meet at least one of the following conditions: The total amount of assets reaches or exceeds CZK 40 million. The annual net turnover is at least CZK 80 million. The average number of employees for the reporting period is 50.
4. Other small accounting entities: Those that exceed at least two of the above criteria.
5. Specially regulated accounting units: Accounting units that are subject to special legal regulation of the obligation to prepare an annual report.

The Accounting Act also defines exceptions under which accounting entities are exempt from the obligation to audit financial statements. These exceptions include entities that have become bankrupt and that have prepared financial statements within 36 months of declaring bankruptcy, unless the creditors' committee decides that an audit is necessary.

These requirements ensure that the annual report provides complete and accurate information about the financial and operating condition of the company, thereby promoting transparency and accountability to shareholders and other stakeholders.

2. What is the purpose of preparing the annual report of a Czech company?

The purpose of preparing an annual report for Czech companies is to provide comprehensive, accurate and comprehensive information on the course of business, current economic situation and development prospects of the company. The annual report serves several key functions:

1. Transparency and accountability: It ensures transparency of the company's operations to shareholders, investors, government regulators and the public.
2. Compliance with legal requirements: The preparation and publication of an annual report is required by law to help maintain the legality of a company's operations and avoid legal problems.
3. Information base for stakeholders: The report provides up-to-date information on the company's financial position, its assets, liabilities and capital, which is critical for investment decisions.
4. Basis for strategic planning: It serves as a basis for the company's management to evaluate past performance and plan future operations.
5. Reflection of non-financial activities: The annual report also includes information on the company's social responsibility, its impact on the environment, research and development, which is important for modern criteria of corporate responsibility.

The mandatory components of the annual report include:

• Financial information: Income statements, balance sheet, statement of capital flows, and cash transactions.
• Auditor's report: Confirmation of the correctness of financial information by the auditor.
• Information about facts after the reporting date: Events that may affect the financial condition of the company.
• Development Prospects: Forecasts and strategic plans for the future.
• Research activities: Research and development costs and results.
• Environmental and labor relations activities: Social responsibility and environmental performance reports.
• Information about branches abroad: Information about the company's international activities.

It is also important to consider that the information must be presented in accordance with specific legal regulations governing the industry or specific aspects of the company's activities. In practice, introductory words from management or additional information about the activities are often included, which improves the overall perception of the annual report by stakeholders.

3. Who approves the annual report of a Czech company?

In the Czech Republic, the company's annual report is approved by the highest corporate governance body. For most companies, this body is the general meeting of shareholders or the meeting of participants, depending on the form of ownership and corporate structure of the company.

The annual report approval process includes the following steps:

1.???? Report preparation: The annual report is prepared by the company's accounting department and is usually audited by an independent auditor if required by law or corporate policy.

2.???? Preliminary inspection: Before approval, the annual report is usually reviewed and approved by the board of directors or the governing body of the company, which in turn submits the report to the highest body for approval.

3.???? Approval at the general meeting: The annual report is approved at the annual general meeting of shareholders or members. At this meeting, the shareholders or members discuss the report and vote on its approval.

4.???? Final procedures: Once approved, the annual report can be published in accordance with national disclosure standards and regulatory requirements.

Approval of the annual report by the company's highest body is a key element of corporate transparency and accountability, emphasizing management's responsibility to shareholders and other stakeholders for the accuracy and completeness of the financial and operational information presented.

4. How to publish an annual report of a Czech company?

In the Czech Republic, the process of publishing the annual report of a company registered in the commercial register is regulated by law and includes several key stages:

1.???? Preparation and approval of the report: The first step is to prepare the annual report, including the financial statements, and have it approved by the relevant corporate body (usually the general meeting of shareholders).

2.???? Audit of the report: If required by law or corporate policy, the annual report shall be audited by an independent auditor.

3.???? Submission for storage in the collection of documents: After approval and audit, the annual report must be submitted to an electronic collection of documents, which is accessible through the public information system managed by the Ministry of Justice of the Czech Republic. The report must be submitted no later than 30 days after its approval.

4.???? Publication dates: The annual report must be published no later than one year from the balance sheet date, which is usually the end of the next reporting period after the balance sheet was prepared.

5.???? No approval: If the annual report has not been approved within the prescribed time, the company is obliged to publish information about this, stating the reasons for the lack of approval.

Publication of the annual report in the collection of documents is a mandatory and important procedure that ensures the transparency of the company's activities and the availability of information for shareholders, creditors, potential investors and other stakeholders. This process emphasizes the company's responsibility to the public and strengthens trust in its operational and financial activities.

5. What is a consolidated annual report of a Czech company?

The consolidated annual report of a Czech company is a financial statement that includes data not only on the company itself, but also on all of its subsidiaries and affiliates under its control or significant influence. It is intended to provide a complete picture of the financial and operational status of the corporate group as a whole. This type of reporting is especially important for holding companies, large corporations with numerous divisions and for all stakeholders who need an overview of the entire group of companies.

Features of the consolidated annual report:

1. Entities of consolidation: Includes all companies under the control of the consolidating company. Control usually means the ability to influence the financial and operating policies of the company, which is often achieved through ownership of more than 50% of the voting shares or interests.
2. Audit: By law, consolidated financial statements must be audited. This requirement emphasizes the need for the information provided to be accurate and reliable.
3. Contents of the report: The consolidated annual report includes standard financial documents (balance sheet, profit and loss statement, statement of capital movements, cash report), but the data on all these documents represent the sum of similar indicators of all companies included in the group after eliminating intra-group transactions and balances.
4. Legislative regulation: In the Czech Republic, the obligation to prepare consolidated financial statements is regulated by the Accounting Act (Zákon o ú?etnictví). This act defines the criteria under which a company must prepare consolidated financial statements and sets out the rules according to which consolidation is carried out.
5. Joint influence: The concept of joint influence is important in determining which entities should be included in consolidated financial statements. Joint influence refers to the ability, together with others, to control the management and financial decisions of another entity without having complete control.

The consolidated annual report provides a more complete understanding of the financial position of the corporate group, its overall profitability and operating performance, enabling shareholders, creditors and other stakeholders to make more informed decisions.

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