The National Accounting Council (hereinafter "NÚR") is an independent expert institution composed of professionals from the Chamber of Auditors of the Czech Republic, the Chamber of Tax Advisors of the Czech Republic, the Union of Accountants of the Czech Republic, and the Faculty of Finance and Accounting at the University of Economics in Prague. Its objective is to promote professional competence and professional ethics in the development of the accounting professions and in the fields of accounting methodology and financing. NÚR cooperates in the drafting of legislation and related standards, publishes expert publications, organizes seminars, and creates interpretations with the aim of unifying practice and contributing to the formulation of optimal procedures in accounting and reporting in accordance with Act No. 563/1991 Coll., on Accounting, and other legal regulations. In the following article, we provide an overview of the interpretations issued in 2025 and 2026.
Interpretation I-51
The first interpretation issued in 2025 was Interpretation I-51, Accounting for Demonstration Products and Goods. This interpretation focuses on own products and goods intended for demonstration purposes, specifically regarding their classification as non-current or current assets. The interpretation proposes an individual solution based on the actual function and use of the demonstration asset and the length of its holding period. If the accounting entity decides to hold these goods or products as demonstration items for more than 1 year, they should be recognized as a non-current asset with a corresponding evaluation of their recording in the financial statements (in accordance with the entity's internal directive regarding acquisition cost limits). If the goods or products are intended for sale and are demonstrated as part of the sales process, they should be reported as current assets (inventory).
Interpretation I-52
Interpretation I-52, Employee Benefits, addresses the recognition of benefits—either through profit or loss or via equity funds—and the timing of the recognition of liabilities towards employees. The interpretation states that a benefit should be accounted for as an expense, i.e., through profit or loss, because an employee is essentially an utilized ("consumed") external resource. An employee's entitlement to an employee benefit is based on legal regulations, a collective agreement, internal regulations, or a binding promise made by the employer. A liability or debt towards employees (classified as a provision, estimated payable, or regular debt, depending on its nature) arises at the moment it is acknowledged by the employer towards the employee, and the expense arises in the period when the employee performed the work for which this benefit is due. At the same time, it is necessary to distinguish whether the given debt is of a long-term or short-term nature and subsequently reflect this fact in the financial statements. Furthermore, the interpretation focuses on the possibilities of accounting for employee benefits upon early termination of employment or after standard termination of employment.
Interpretation I-53
Interpretation I-53, Valuation of Securities and Equity Investments Using the Equity Method in Individual Financial Statements of Business Entities, targets a problem arising from the application of EU Directive 2013/34 regarding the reporting of equity investments and the equity method. This directive is primarily designed for consolidated financial statements, yet it permits its use in individual financial statements as well. The interpretation addresses the issues surrounding the application of the equity method, as various approaches to its reporting exist in practice.
According to the interpretation, the acquisition cost of a security or business share should be adjusted by the share of the change in equity between the acquisition date and the equity valuation date, and by the amortization of "goodwill" (i.e., the difference between the acquisition cost and the share in the fair value of acquired assets and liabilities as of the acquisition date). If the carrying amount of assets and liabilities differs significantly from their fair value, equity should be remeasured based on fair values as of the acquisition date, and the evolution of fair values should be tracked throughout the holding period.
The interpretation further states that the equity of an entity under significant influence must be maintained using the same accounting methods as the reporting entity's equity. In other words, if a reporting Czech entity holds a business interest abroad, it should evaluate whether the reported equity in the owned entity is based on the same principles applied under Czech accounting regulations.
Interpretation I-54
This Interpretation I-54, Valuation of Financial Investments Upon Contribution and Division by Spin-Off (Vyčlenění), was developed in response to statutory changes—specifically the amendment to Act No. 125/2008 Coll., on Transformations of Business Corporations and Cooperatives, which introduced a new form of division known as a spin-off (rozdělení vyčleněním). The interpretation establishes the procedure for valuing an acquired share by the contributor or by the company being divided by spin-off, particularly in situations where:
- The resulting value of the investment is negative;
- An allowance for acquired assets or goodwill is attached to the subject of the contribution;
- Valuation allowances are recorded for the contributed assets; or
- Provisions related to the contribution are recorded.
The primary approach for valuing the financial investment for the contributor should be the net book value of the contribution subject at the contributor. If the book value of the contribution reaches negative values, a zero valuation should be stated on the accounts for equity investments and contributions, and the negative difference should be accounted for through equity. This represents a departure from the existing wording (set out in Czech Accounting Standard No. 014 - Long-Term Financial Assets), which dictates that a negative difference should be posted to revenues.
Conclusion
Although NÚR interpretations are not a primary source of law (binding legal regulations), they represent a recognized standard in practice. For accounting entities, compliance with them is often crucial to ensuring that financial statements present a true and fair view. Many interpretations were utilized during the drafting of the new Accounting Act, which will represent a "revolution" in the field of financial reporting.
In the coming months, we expect the issuance of a new interpretation within the ongoing settlement of comments regarding the proposed interpretation NI-75, Determination of the Timing of Revenue Recognition, which we have previously reported on in our updates.
This text was translated by AI.
