Opened Problems Of The Application Of IAS 39 On Reporting Of Financial Derivatives In The Czech Republic

Abstract

Although in the United States derivatives have been traded since around the middle of the nineteenth century, in the Czech Republic a derivative was an unknown term until lately or rather a term referring to someplace in an ununknown empire. The situation started to change roughly in the second half of nineties, when as part of macroeconomic shocks and government crisis in 1997 when interest rates increased significantly and the Czech crown devaluated from day to day. At that time, companies felt, for the first time ever, how heavy impact an unexpected and not counted on change of market conditions may have on them. From 2001 to 2004, another unusual phenomenon occurred which shook the business sector; should a prophet predicted it at the end of the nineties, he would probably be clamed to be crazy. The exchange rate of dollar against crown dropped from over 40 CZK/USD to 20 CZK/USD. Companies that made contracts with their customers in dollars but with suppliers in crowns bore a great exchange rate risk and they frequently paid a lot when dollar dropped. At the moment we also have to mention world prices of oil and oil products which rocketed so high that nobody could have expected it several years ago. This paper focuses on the comparison of reporting of the derivatives using IFRS in comparison with the Czech accounting legislature by the companies listed on the Prague Stock Exchange (PSE). Study draws the attention to check the differences in reporting of derivatives and also compares their qualitative advantages. Results of this study are based on the analysis of annual reports of the companies listed on the PSE. Any of analyzed companies didnt allow all of the requirements of IFRS on reporting of the financial derivatives.