Acta Univ. Agric. Silvic. Mendelianae Brun. 2011, 59(4), 187-194 | DOI: 10.11118/actaun201159040187
Applying the prudence principle in non-profit organizations and financial institutions
- Ústav účetnictví a daní, Mendelova univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika
The paper describes in detail the accounting principle of prudence in non-profit organizations and financial institutions. It defines its application in such organizations and based on comparison it evaluates the practical use of the prudence principle and its reflection in the accounting books. The main focus is on differences in applying the prudence principle that result from differences in the purpose, activities and methods of asset management in these organizations. The practical application of the prudence principle in accounting consists mainly in the creation and use of provisions and impairments. These methods are defined by the Implementing Regulation to the Accounting Act No. 563/1991. The paper also provides tables where the creation and use of impairments and provisions in the above-mentioned organizations is compared with how business companies proceed in creating impairments and provisions.
The key legislation standardizing accounting in the Czech Republic is the Accounting Act No. 563/1991, as amended, which stipulates the general accounting principles, the so-called accounting philosophy. The accounting is built around the general accounting principles, which are perceived as the pillars of accounting. Even though they are not stipulated in any particular law, they are legally enforceable and their ignorance can be sanctioned. The general accounting principles represent a set of rules to be observed in keeping the accounting books, preparing the accounting reports and submitting the accounting reports to users. The keystone accounting principle is the principle of true and fair reflection of facts the essential goal of which is to report in the financial statement actual assets and the financial position of the accounting unit with an essential focus on reporting events that occurred during the accounting period with respect to their content.
Keywords: fair and true principle, provision, imfairment, financial institutions, non-profit organizations
Received: February 10, 2011; Published: May 29, 2014 Show citation
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