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Petra Čechová | April 3, 2023

Interpretation I-8 of the National Accounting Standards Board faces changes

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On March 21, 2023, the National Accounting Standards Board approved an updated version of Interpretation I-8 Social Fund and Similar Funds Generated from Earnings for the external comments proceeding, which will last until 21 April, 2023. The full text is available here as “Current text”. Comments can be sent to The authors of this update are prof. Ing. Libuše Müllerová, CSc.  Ing. Libor Vašek, Ph.D., doc. Ing. Ladislav Mejzlík, Ph.D., Ing. Jiří Pelák, Ph.D.

The update expands and describes in more detail an issue that can arise from incorrect accounting for social funds established to cover employee benefits and other needs. The solution provides guidance on how to accrue employee benefit entitlements and potential loans from the company to employees and how to properly account for these movements in the financial statements.

Compared to the original interpretation, the “justification” is significantly expanded in the update. The Interpretation states that the social fund is an accumulated profit that cannot be distributed to the shareholders. It aims to protect the resources intended to cover employee benefits. It stresses that it is not permissible to record the accrual of employee benefit entitlements directly against the social fund in the accounts. When used, the social fund is reduced against retained earnings of previous years. We will monitor further developments in the changes to the interpretation.

Author: Petra Čechová