The new Accounting Act has been published in the Official Gazette, No. 85/24, on July 19, 2024, and it comes into effect on July 27, 2024. On the date the new Act becomes effective, the existing Accounting Act (Official Gazette, No. 78/15, 134/15, 120/16, 116/18, 42/20, 47/20, 114/22, and 82/23) ceases to apply.
In comparison with the existing Act, the most significant novelty is the introduction of sustainability reporting for certain groups of entrepreneurs, as well as changes in the companies subject to audit, i.e. the thresholds for becoming subject to audit.
Namely, the (old) Accounting Act had to be aligned with the legal acquis of the EU since the European Commission presented the CSRD in April 2021 as part of the European Green Deal and the Sustainable Finance agenda. The aim is to direct private capital towards financing green and social transitions by allowing financial markets access to environmental, social, and governance information that is comparable and reliable. Additionally, it aims to discourage manipulative green marketing. Changes in this regard include the following:
- the number of entities required to report on sustainability will be expanded; this will include all large enterprises according to the criteria from the Accounting Directive, i.e. the new Accounting Act, as well as small and medium-sized enterprises whose securities are listed on a regulated market in the EU
- entrepreneurs will have to disclose information on five reporting areas: business model, policies (including due diligence procedures conducted), outcomes of policies, risks and risk management, and key performance indicators relevant to business
- the sustainability report may be limited, or prepared in a narrower form by:
- a small entrepreneur whose securities are listed on a regulated market of any EU member state
- a medium-sized entrepreneur whose securities are listed on a regulated market of any EU member state
- a small and simple credit institution as defined by the act governing credit institutions
- an insurance and reinsurance company as defined by the act governing insurance.
- subsidiaries can be exempted from preparing an individual report if the subsidiary and its subsidiaries are included in the consolidated management report of the parent company
- the CSRD Directive specifies that sustainability reporting entities have to prepare their management report in the electronic format for reporting
- the management report containing the sustainability report will undergo a verification process similar to annual financial statements
- the provisions of the new Act will require the first sustainability reports to be prepared in 2025 for the financial year 2024.
The number of entrepreneurs required to report on sustainability at the EU level will increase from about 11,700 to around 50,000, and in the Republic of Croatia from approximately 70 to about 500.
Additionally, attention should be drawn to the transitional and final provisions, which regulate the transition to the electronic reporting format, a single European access point, the adoption of regulations and decisions, as well as the deadline for adopting bylaws under the new Act and the continuation of the validity of bylaws based on the Act currently in force.
Regarding the threshold for companies becoming subject to audit, the previous thresholds have been increased, and now the companies that exceed the indicators in at least two of the following three conditions become subject to audit:
– Total assets of €2,500,000 (previously €1,990,842.13)
– Revenue of €5,000,000 (previously €3,981,684.25)
– Average number of employees during the financial year of at least 25.
Additionally, the thresholds for classifying the size of entrepreneurs are increased as follows:
- A micro-entrepreneur is a company that does not exceed the threshold indicators in two of the following three conditions:
1) total assets of €450,000.00 (previously €350,000)
2) net revenue of €900,000.00 (previously €700,000)
3) average number of employees during the financial year – 10 employees - A small entrepreneur is a company that is not a micro-entrepreneur and does not exceed the threshold indicators in two of the following three conditions:
1) total assets of €5,000,000.00 (previously €4,000,000)
2) net revenue of €10,000,000.00 (previously €8,000,000)
3) average number of employees during the financial year – 50 employees - A medium-sized entrepreneur is one that is neither a micro nor a small entrepreneur and does not exceed the threshold indicators in two of the following three conditions:
1) total assets of €25,000,000.00 (previously €20,000,000)
2) net revenue of €50,000,000.00 (previously €40,000,000)
3) average number of employees during the financial year – 250 employees - A large entrepreneur is an entrepreneur who exceeds the threshold indicators in at least two of the three conditions above, along with other companies subject to audit under Article 5 of the Accounting Act.
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Please keep in mind that legislation is subject to frequent change. This newsletter is therefore necessarily based on our understanding and correct interpretation of the law and practice at the time of publication of this newsletter. This newsletter will not be updated due to changes in legislation that occur after the issuance of this letter.