RD-Law 1/2021, 12th January, modifies the General Accounting Plan to adapt it to the accounting criteria adopted by the European Union. Specifically, we are talking about accounting criteria in the matter of financial instruments and in relation to ordinary income from contracts with clients (IFRS-EU 9 and IFRS-EU 15), which are now subject to transposition into Spanish regulations.

The application of this reform will affect the fiscal years starting on 1st January, 2021.

Main features of the accounting reform

  • The definition of the Fair Value included in the conceptual framework is modified, estimating it for a specific date
  • The categories of financial assets are reduced from six to four, as well as the categories of financial liabilities that will go from three to two
  • A principle of income recognition is incorporated into the PGC at the moment in which the transfer of control of the goods or services agreed with the client takes place
  • All financial assets must be valued at fair value with changes in the profit and loss account, except for investments in group, multi-group and associated companies, and financial assets that are considered common loans
  • The category of financial assets available for sale is replaced by that of Financial Assets at fair value with changes in Equity. Modifications are also made regarding hybrid financial instruments in order to simplify their accounting treatment
  • The regulation of accounting hedges is modified, changing the criteria to be able to apply them in order to obtain greater flexibility in the requirements to be met. The international reform has sought to align the accounting results and the risk management of the company
  • The fair value minus costs to sell is included as a valuation method as an exception to the general rule for the valuation of inventories, provided that these operations are carried out by financial intermediaries that sell listed raw materials.

Update of the General Accounting Plan for SMEs

For its part, the RD also modifies the PGC for SMEs. A technical improvement is introduced related to the regulation on fair value, the criteria for accounting for the application of profit to the partner, with the appropriate criteria for the presentation of capital issues and the standard for preparing the report.

On the other hand, the information to be presented in the annual accounts for the first fiscal year beginning the 1st January 2021, will generally exclude the obligation to necessarily present comparative information for the previous fiscal year.

These developments will affect in the same way the formulation of the Consolidated Annual Statements in line with the modifications included in the individual accounts, as well as modifications to the norms for adapting the PGC to non-profit entities.

If you have questions about the latest regulatory changes, do not hesitate to contact the professionals of Arintass.

Roberto Cerrato

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