Tangible fixed assets
include tangible assets, which the accounting entity intends to keep for more
than one accounting period (the Income Tax Act also specifies that the input
price of the tangible fixed assets must exceed CZK 40 000).
The value of the
tangible fixed assets is measured by historical costs (acquisition price) for
assets purchased, by production costs for processed production and by
replacement price for assets obtained gratuitously. Tangible fixed assets are
subject to depreciation; the accounting books should show the so-called book
depreciation. The tangible fixed assets must be accounted for in compliance
with the prudence principle as of the balance day, meaning that the accounting
entity should disclose either the net book value or the lower present market
price of the tangible fixed assets concerned.
Measurement at fair
values is preferred by the international companies in the Czech Republic. We
think that there is a good information background for the calculation of the
fair value of property, plant and
equipment (PPE) or investment property. On the other hand, the Czech
Ministry of Finance prefers the prudence principle and also, for the Tax
Authorities, it is much easier to find out the historical costs rather than to
calculate the fair value.
Financial leases are
treated totally differently under Czech GAAP. The “form over substance”
principle is fully applied, as it is the leasing company, which reports the
leased assets, not the lessee! We think that this is the main problem of Czech
GAAP nowadays and has great consequences for financial decisions. Also, it
should be stated here the unwillingness of the Czech Ministry of Finance to
solve the problem with financial leases as under IFRS, where the traditional
principle “substance over form” is used.
