Proceedings

BENEFITS AND COSTS OF PREPARING IFRS
STATEMENTS BY NON-LISTED COMPANIES:
EVIDENCE FROM THE CZECH REPUBLIC
David PROCHÁZKA 1
University of Economics, Prague, Czech Republic
ABSTRACT
EU Regulation No. 1606/2002 obliges companies listed on the EU stock exchanges to prepare
consolidated financial statements in compliance with IFRS. Many Czech companies are under
control of foreign companies (listed on EU capital markets). As the voluntary application of
IFRS was not allowed until 2010, Czech companies prepared financial statements according
to Czech legislative for statutory purposes. However, for consolidation purposes, they had to
provide parent companies with financial statements prepared in compliance with IFRS.
The paper deals with three basic approaches to the conversion of financial statements. The
first method uses conversion on the financial statements level. The second method applies the
conversion on the trial balance level. Finally, some companies prefer to implement
specialised accounting software, which enables to record all accounting transactions
parallelly under CAS and IFRS. Each method is shortly described and its main cost-benefits
are analysed. Theoretical conclusions are shortly evidenced by empirical data on example of
the Czech non-listed companies.
KEYWORDS: Conversion of Financial Statements; IFRS; Czech Accounting Standards;
Dual (Financial) Accounting System.
INTRODUCTION
The adoption of the International Financial Reporting Standards has caused a radical
change in financial reporting, esp. in countries with the code-law tradition of
accounting regulation. The research evidences an increased usefulness of financial
statements prepared in accordance with the IFRS worldwide. The benefits of
accounting harmonisation are well known. However, the implementation of the IFRS
into national legislation elicits costs for many subjects involved in the process. E.g.
many national legislations decree entities to prepare the IFRS statements for European
stock exchanges and simultaneously to prepare the financial statements based on
national accounting standards for statutory and/or tax purposes. As a consequence,
entities have to maintain two different sets of accounting data. The conversion of
financial statements from one set to another is a complex and costly process. The
paper’s main aim is to analyse advantages and disadvantages of various methods used
for the conversion of financial statements and to evaluate current practice in the Czech
Republic as far as non-listed companies concern.
1
Correspondence address: David Procházka, University of Economics, Prague;
email: prochazd@vse.cz
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