In the ever-evolving landscape of financial regulations, the recent amendments to Croatia’s Accounting Act (i.e. ZOR) mark a significant stride towards harmonizing the nation’s legal framework with the EU’s legal standards. While these changes don’t encompass all the necessary revisions, ZOR has been enhanced in this phase to align with the revised EU Directives concerning the disclosure of corporate tax information, the content and responsibility associated with such reporting, and provisions for non-financial reporting. Moreover, the amendments to ZOR introduce the option of using a functional and presentational currency other than the euro, along with requirements for handling exchange rate differences. These changes also introduce fresh perspectives for credit unions, authorized auditors, and more.
The changes in reporting corporate taxes specifically target substantial enterprises with revenues and consolidated income exceeding 750 million euros, focusing on these significant players. Non-financial reports are now mandated only for large enterprises, publicly relevant entities, and parent companies with an average workforce of 500 or more employees on the balance sheet date.
One of the pivotal alterations in the ZOR is the elimination of the term “individual trader.” This change stems from the definition of an entrepreneur, which has undergone this removal, corresponding with its elimination from the Amendments to the Companies Act.
Another significant amendment lies in the accounting year for businesses ceasing operations via an abbreviated procedure without liquidation. Traditionally, the accounting year included periods shorter than 12 consecutive calendar months due to factors like business establishment, change in status, shift in the business year, liquidation, or bankruptcy. With the ZOR amendments, this provision now extends to the cessation of business via an abbreviated procedure without liquidation.
The amendments to ZOR also cover accounting documents, specifically augmenting the content description and participant identification within these documents. While historically requiring accounting documents to include a content description and identification of participants in business events, the amendments now further specify the need to enhance the content of these documents with the personal details of the transaction participants. These personal details should be relevant, essential, and restricted to only what is necessary for better identification while respecting personal data protection regulations (GDPR).
The ZOR amendments will increase the membership of The Financial Reporting Standards Committee (OSFI)) from 9 to 11 members.OSFI is preparing to introduce a new Croatian Accounting Standard (HSFI) for companies undergoing bankruptcy and liquidation. This standard will prescribe rules and annual financial statements for these entities, not based on indefinite operational time. Additionally, as indicated in the rationale accompanying the draft proposal for ZOR amendments, OSFI will develop a distinct template for creating notes for micro and small enterprises’ obligatory annual financial statements, aiding in preparing these reports.
The Proposed ZOR will activate specific provisions within eight days of publication on January 1, 2024.
In the coming period, the Structure and Content of the Annual Financial Statements Regulation will change, with the Ministry of Finance tasked with aligning it with the ZOR amendments within this year. Furthermore, because these amendments address only certain necessary harmonizations of the Croatian accounting framework with EU requirements, we can anticipate other changes to ZOR shortly.