(4) Basic Accounting Principles and Accounting Methods
A summary of basic accounting principles and accounting methods, the Company applied during the reporting period:
- Accounting Principles and General Accounting Methods
The Company’s financial statements have been prepared on the going concern basis in accordance with the Slovak Accounting Act and the related regulation.
The Board of Directors has prepared these financial statements in accordance with the effective Slovak legislation on the ordinary financial statements. They will be submitted to the ordinary General Meeting of the Company’s shareholders for approval.
The Company consistently applied the accounting methods and the general accounting principles.
- Non-Current Intangible and Tangible Assetsk
Acquired non-current assets are stated at cost, which includes the acquisition price and the related ac-quisition costs (customs duty, transport, assembly, insurance, etc.). Neither the interest on borrowed capital nor the realised foreign exchange differences are included in the acquisition costs.
Internally generated non-current assets are stated at own cost, which includes all direct costs spent on production or other activities and indirect costs related to production or other activity.
Non-current assets acquired as grants are stated at replacement cost, which is the price at which these assets would be acquired at the time they are accounted for.
Depreciation Plan
Non-current assets are depreciated under a plan that has been prepared on the basis of their expected economic useful lives and expected wear-and-tear.
Accounting depreciation is applied for the first time in the month in which the respective asset is put into use.
Low-value non-current intangible assets with an acquisition cost (or own cost) not exceeding SKK 50,000 are written off when put into use.
Non-current intangible assets are depreciated using the straight-line method during their estimated eco-nomic useful lives.
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Estimated Useful Life of Assets for Depreciation Purposes |
|
|
| |
Description |
Number
of years |
Depreciation
charge |
|
| |
|
|
|
|
| |
Incorporation expenses |
4 |
25.0 % |
|
| |
Software and licences |
4 |
25.0 % |
|
| |
Valuable rights |
4 |
25.0 % |
|
| |
|
|
|
|
Low-value non-current tangible assets with an acquisition cost not exceeding SKK 30,000 are written off when put into use.
Non-current tangible assets are depreciated using the straight-line method during their estimated eco-nomic useful lives.
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Estimated Useful Life of Assets for Depreciation Purposes |
|
|
| |
Description |
Number
of years |
Depreciation
charge |
|
| |
|
|
|
|
| |
Buildings, halls, and structures |
30 – 40 |
2.5 – 3.3 % |
|
| |
Plant and equipment |
4 – 30 |
3.3 – 25.0 % |
|
| |
Vehicles |
4 – 15 |
6.7 – 25.0 % |
|
| |
Other non-current tangible assets |
4 – 30 |
3.3 – 25.0 % |
|
| |
|
|
|
|
In case of a temporary diminution in the value of a non-current asset identified during physical verifica-tion that is significantly lower than its carrying value after deducting the accumulated depreciation, a pro-vision is set up to reflect its net realizable value.
- Non-Current Financial Assets
Securities and ownership interests are classified as non-current
financial assets when held by the Com-pany for more
than one year.
When acquired, financial assets are stated at cost, which
includes the acquisition price and the related acquisition costs.
Securities denominated in a foreign currency are converted into
Slovak crowns using the NBS exchange rate at the date of
acquisition.
Ownership interests held by the Company are stated at
acquisition cost. If the investment’s market value falls below
the acquisition price, a provision is set up. Where no market
value is available, the Com-pany’s share in the equity of the
investment held is taken as an approximation of this market
value.
- Inventories
Inventories include material in stock and merchandise in stock.
Material and merchandise are stated at cost, which includes the
acquisition price and the related acquisition costs (customs
duty, transport, insurance, commissions, etc.). Interest on
borrowed capital is not included in the acquisition costs. The
Company uses method A for the accounting treatment of
inventories. For stock withdrawal the method of the weighted
arithmetical average from acquisition costs is used.
Provisions for inventories are set up to reflect a temporary
diminution in their book value. Adjustments are recorded when
the book value of a specific inventory item is higher than its
market value, the recov-erability is uncertain, or when it is
considered to be obsolete or slow-moving.
- Receivables
When originated, receivables are stated at their nominal value; assigned receivables and receivables re-sulting from a contribution to share capital are stated at cost, which also includes related acquisition costs. A provision is set up for bad and doubtful debts, as well as for receivables from debtors in bank-ruptcy.
Receivables falling due after more than 12 months are shown on the balance sheet under item C.II. Non-current receivables. Those falling due within 12 months are shown on the balance sheet under item C.III. Current receivables.
- Financial Assets
Financial assets consist of cash, bank account balances, and current financial assets where the risk of changes in the value of these assets is negligibly low. Current financial assets include short-term securi-ties (equity shares and debt securities) that period to maturity is less than one year or are intended for sale within one year of the date of acquisition.
- Deferred Expenses and Accrued Income
Deferred expenses and accrued income are stated at their nominal value, they are stated at the amount reflecting the accrual principle.
- Provisions
Provisions are liabilities of uncertain timing or amount and are stated at the expected amount of the li-ability.
- Liabilities
Liabilities, when originated are stated at their nominal value. Accepted liabilities are stated at cost.
On the accompanying balance sheet, liabilities falling due after more than 12 months are shown under item B. II. Long-term liabilities. Liabilities falling due within 12 months are shown under item B. III. Short-term liabilities.
- Deferred Revenues and Accrued Expenses
Deferred revenues and accrued expenses are stated at their nominal value, they are stated at the amount reflecting the accrual principle.
- Deferred Taxes
Deferred taxes relate to:
a) temporary differences between the carrying value of assets
and the carrying value
of liabilities shown on the balance sheet and their tax base;
b) the possibility to carry forward a tax loss to future periods,
which means the possibility
to deduct the tax loss from the tax base in the future; and
c) the possibility to transfer unused tax deductions and other
tax claims to future periods.
Deferred tax assets are recognized to the extent that is probable that future taxable profit will be avail-able against which the temporary differences can be utilised.
For determination of deferred income tax the tax rate expected to be effective at time of reversal of tem-porary differences, is used.
- Corporate Income Tax
Corporate income tax is expensed in the period when the tax liability arises. In the accompanying
in-come statement, it is calculated on the basis of the profit/(loss) before taxes that has been adjusted for tax-deductible and tax non-deductible items due to permanent and temporary adjustments to the tax base, for tax relief, and any loss carried forward. The tax liability is stated net of corporate income tax advances that the Company paid during the year.
- Foreign Currency
Assets and liabilities in foreign currency are converted into Slovak crowns using the foreign exchange rate of the National Bank of Slovakia at the transaction date and in the financial statements at the bal-ance sheet date.
- Recognition of Revenues and Expenses
Costs and revenues are recognized on an accrual basis in the period they relate to, regardless of when the payment occurs.
In ance with the accounting principle of prudence, the Company recognizes at the balance sheet date only earned revenues at the year’s end, whereas all potential liabilities that are expected, including probable losses, are charged to expenses, as soon as they become known.
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