On the 30th of January, the Official State Gazette published the long-awaited Royal Decree 1/2021, dated the 12th of January, through which the General Accounting Plan, the General Accounting Plan for Small and Medium Enterprises, the Standards on Drawing up the Consolidated Annual Accounts and the standards on adapting the General Accounting Plan for Non-Profit Organisations were modified.

The draft of this legal rule was released in October 2018 and it was expected to be implemented in the accounting year starting on the 1st of January, 2020, however it was put back a year, so it finally came into force in the accounting year starting on the 1st of January, 2021.

The subject matters that have been modified include the following:

  • The changes in the definition of the controversial Fair Value.
  • The reduction of the Financial Assets categories, from 6 to 4 (in the end the “Available for sale” is not eliminated but it is now called “Financial Assets at a fair value with changes in the Net Worth”).
  • The reduction of the Financial Liabilities categories, from 3 to 2.
  • The requirements to identify hybrid financing instruments are simplified.
  • The requirements for hedging strategies are made more flexible.
  • The revenue recognition principle for sales and the provision of services when there is a transfer in the control of the goods or services involved is consolidated.
  • The annual accounts models are adapted to the changes made in the registration and valuation standards.

In order to continue simplifying the accounting obligations for smaller companies, apart from the new wording given to the definition of fair value, the aforementioned does not apply to the General Accounting Plan of Small and Medium Sized Enterprises.

Lastly, with regard to the modifications made that are associated with recognition and valuation, the Royal Decree establishes the retroactive application of the law and places the recognition of the differences arising in one reserve entry.

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