Change in the categorization of accounting entities – higher thresholds already applicable in the assessment for 2024

The amendment to the current Accounting Act, which brings a major modification of the categorization criteria for accounting units, has officially been announced in the Collection of Laws.

The provision of the law regarding the new categorisation came into force on 3 September 2025. However, the new, significantly higher thresholds will apply to the assessment of the categorisation of accounting entities for accounting periods beginning on 1 January 2024 already. The key factor is the start date of the accounting period, not the year in which the financial statements are prepared.

The primary purpose of the amendment is to valorise the existing financial criteria in the light of the cumulative inflation recorded in the European Union in the period of 2013-2023. For many entities, remaining in the lower category implies a simplification of administration and a reduction in the scope of the obligations to prepare, report and disclose financial statements. The new thresholds apply to balance sheet total assets and annual net turnover. The threshold on the average number of employees remains unchanged.

Below is a comparison of the original and new thresholds for categorisation. For the assessment, the company must meet or fail to meet at least two of the three criteria (assets, turnover, employees) in two consecutive accounting periods:

Let us imagine a company Beta s.r.o., which has stable values in 2023 and 2024, and has reached the following values: assets of CZK 110 million, turnover CZK 230 million and 45 employees. It was a medium-sized entity within the financial statements as of 31 December 2022.

• For the year 2023 (as per the original thresholds) the company exceeded 2 of the 3 thresholds (assets and turnover) and would therefore fall into the medium category.
• For the year 2024 (under the new thresholds), the company would not exceed any threshold, so it would be categorised as small.

When changing the category of an accounting entity, and thus also changing the related obligations not only in the preparation of financial statements, the key rule is to assess the values achieved on two consecutive balance sheet dates. In our case, Beta is a medium-sized accounting entity for 2025 as well. The reclassification to the small category will only occur if the same (or lower) values are confirmed for the 2025 accounting period and the actual reclassification from medium to small will be from the year 2026.

The change in categorisation also has a direct impact on the obligation to have audited financial statements. This obligation is linked to the category, into which the company falls. A more significant relaxation is planned in this area. We will inform you about this fact in a follow-up article.

Our dedicated team is ready to assist you not only in determining the correct category of entities, but also the related obligations.