Note: This article was written in 2003. Since business changes fast in Slovakia, the information contained in it might be out of date. Please review newer articles or contact a professional consultant before making business decisions.

These articles were published in the Spectacular Slovakia travel guide, published annually by The Slovak Spectator since 1996. The latest editions can be obtained from our online shop.

The reform of Slovak accounting law

By Richard Farkaš

 Courtesy: KPMG

Slovak accounting law has undergone two major reforms over the past ten years intended to make the law compliant with the requirements of a market economy. The first significant change was in 1993 when many important elements were incorporated in the Slovak Act on Accounting such as the requirement for accounts to give a "true and fair" view of accounting events and the adoption of the "prudence" principle.

A further major change took place at the beginning of 2003 when the new Act on Accounting came into force. This set even more demanding requirements for accounting records and primarily for financial statements. There is now a much more emphatic requirement that a true and fair view of accounting events should be given and that financial statements should provide all information necessary and relevant for their users .

Financial statements in Slovakia consist of three components: the balance sheet, the profit and loss account and supporting notes to the accounts. The cash flow statement and the statement of changes in equity form integral parts of the notes to the accounts.

From 1993 several important elements from International Accounting Standards (IAS) have been implemented in the Slovak accounting regulations including:

  • As noted above the inclusion of the "true and fair view" presentation principle and the "prudence" and "completeness" principles;
  • Accounting for construction contracts;
  • Related party disclosures,
  • Disclosure of cash flow.

In 2003 further elements were incorporated from International Accounting Standards including:

  • The option to apply an accounting period different from a calendar year;
  • The requirement for valuation of certain assets and liabilities (including securities, derivatives and assets and liabilities hedged by derivatives) at their fair value,
  • The option to apply the equity method in financial statements of an individual company,
  • Accounting for deferred taxes.

There are still several other features of International Accounting Standards which it would be appropriate to implement in Slovak accounting regulations. These include in particular, the adoption of a "substance over form" principle (for instance in the case of leasing transactions).

Slovakia is one of only a few countries in the world chosen for a pilot project for the implementation of both International Accounting Standards (IAS) / International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA). This project should be launched in 2003 and will undoubtedly contribute to greater transparency in financial reporting and to the improvement of the business environment in Slovakia.

The author is an assurance partner at KPMG Slovakia. He is widely respected as one of the leading experts in Slovak accounting law and regulations.

These articles and related information were published in Spectacular Slovakia 2003.

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