Changes in accounting

Updated: 08.07.2010

The Accounting Standards Board has prepared draft instructions containing detailed guidelines for the changeover to the euro. It includes answers to the questions how the companies, whose accounting and reporting currency changes from the Estonian kroon to the euro, will convert the balances of accounts from kroons into euros as of the €-Day and what rules should be observed while preparing reports before and after the €-Day.

According to the general principle, insignificant differences due to conversion and rounding of currency exchange rates may be accounted for and indicated in reports in a simplified manner. In case of increase or reduction of share capital, the resulting difference will be recorded under the item "Retained earnings from previous periods".

 

Changes in limitations of mandatory auditing

In the new wording of the Authorised Public Accountants Act, new financial criteria for mandatory auditing and mandatory consolidation have already been provided. The obligation arises with regard to persons who are required to maintain accounting and have at least two indicators in the annual accounts, which exceed the conditions below:

• sales revenue or revenue 1 000 000 euros,

• total assets as of the balance sheet date 500 000 euros,

• average number of employees 15.

 

The obligation also arises with regard to persons who are required to maintain accounting and have at least one indicator in the annual accounts, which exceeds the conditions below:

• sales revenue or revenue 3 000 000 euros,

• total assets as of the balance sheet date 1 500 000 euros,

• average number of employees 45.

 

The audit obligation arises with regard to persons who are required to maintain accounting and have at least two indicators in the annual accounts, which exceed the conditions below:

• sales revenue or revenue 2 000 000 euros,

• total assets as of the balance sheet date 1 000 000 euros,

• average number of employees 30.

 

The audit obligation arises also with regard to persons who are required to maintain accounting and have at least one indicator in the annual accounts, which exceeds the conditions below:

• sales revenue or revenue 6 000 000 euros,

• total assets as of the balance sheet date 3 000 000 euros,

• average number of employees 90.

In case of reporting periods ending on the €-Day or later, amounts expressed in euros shall be taken as a basis.

 

Amendment of corporate articles of association

Transition to euro shall be reflected in the articles of association of legal persons within an optimum period and without causing unnecessary costs for the organisation. Therefore, the following amendments will be introduced in the Commercial Code.

• The new amendments to the Commercial Code allow registration of the articles of association of new legal persons in private law, where data have been presented in euros, even before the €-Day.

• An allowance is made to amend the articles of association under a simplified procedure, provided the amendment is related only to the replacement of kroons with euros. Instead of the ordinary resolution of the meeting of shareholders or the general meeting, which must be passed with at least 2/3 of the votes of the shareholders or votes represented at the general meeting, this amendment can be made when over a half of the shareholders or votes represented at the general meeting vote in favour.

• In one year from the €-Day, state registers shall not register any amendments to the articles of association if the data in the articles of association is not changed into euros at the same time.

• After the entry into force of the law, starting from a period before the €-Day and within a year from the €-Day, companies are exempt from the obligation to the pay state fee for entry of the amendments regarding conversion of share capital of the company from Estonian kroons to euros into the commercial register. The following actions will be exempt from the state fee: entry of the amendments of the articles of association into the commercial register, incl. changing of the share capital of the company and entry of the changes of the share capital of a public limited company or private limited company into the business register, as well as entry of the changes in the articles of association, aimed at the introduction into use of the share without a nominal value, in the commercial register.

 

Public limited companies and private limited companies

Upon the conversion of share capital and shares into euros, shareholders shall be treated equally and the rights of shareholders shall be preserved pursuant to existing proportions. Amendments will be made to the Commercial Code, enabling all financial specifications significant for the activities of the company to be indicated in euros.

i) 25 000 euros will be established as the minimum capital of public limited companies. Founding of new companies with share capital indicated in euros shall be made possible at least six months prior to the €-Day .

ii) 10 euro cents will be established as the minimum nominal value of shares of a public limited company. The nominal value of a share shall be a multiple of 10 euro cents.

iii) Public limited companies will be allowed to apply shares without nominal value. 10 euro cents will be established as the minimum book value of a share without nominal value. The establishment of a minimum book value for shares without nominal value prevents the emergence of shares with excessively low book value. A public limited company is not allowed to use shares with and without nominal value simultaneously.

• 2 500 euro will be established as the minimum share capital of private limited companies.

• 1 euro will be established as the minimum nominal value of a share. Multiplicity rate of the nominal value of a share will also be 1 euro.