New Accounting Act – In a Nutshell
The Danish Parliament has passed a new accounting law designed to keep pace with digital developments.
The law applies to all businesses subject to the Annual Accounts Act.
It also applies to all businesses subject to accounting requirements where net revenue
exceeds 300,000 DKK in two consecutive years.
The new law contains the following main points:
- Requirements for the Digital Storage of Accounting Records
- Requirements for Digital Accounting Systems
- Enforcement of Compliance with the Bookkeeping Act
- Significantly higher fines for violations of the Accounting Act.
The new Accounting Act formally took effect on July 1, 2022, while the requirements for the digital storage of accounting records and the use of digital accounting systems will be fully implemented in 2023 and 2024.
However, with regard to the requirement to describe a company’s accounting procedures, the Danish Business Authority has stated on its website that companies will not be required to comply with the requirement for a formal description until a specific form, along with guidelines from the Danish Business Authority, is available.
Requirements for the digital storage of accounting records under the new Bookkeeping Act:
- Record the company's transactions digitally
- Store Records Digitally
- Ensure that a digital backup of records and supporting documents is made on an ongoing basis and that it is stored securely.
This means that, in addition to the requirement for digital bookkeeping, there is now also a requirement for the digital storage of supporting documents and transactions in a cloud-based repository within the EU/EEA.
As before, the retention period is five years from the end of the fiscal year to which the material relates.
Admind OFFICE includes the following modules by default:
Requirements for Digital Accounting Systems
Effective no earlier than January 1, 2024, businesses subject to bookkeeping requirements (and no earlier than January 1, 2026, for small businesses) must have transitioned to using a digital bookkeeping system that meets the following requirements:
- Support compliance with the specific requirements of the Bookkeeping Act, including:
– Ongoing recording of the company’s transactions
– Recording and secure storage of supporting documents for five years on a third-party server
– Provision of access to the authorities. - Comply with the specified IT security standards, including:
– Support secure login, user and access management
– Automatic backup of records and supporting documents. - Support the automation of administrative processes, including
– Posting in accordance with a public standard chart of accounts
– Automatic sending and receiving of e-invoices.
Companies may choose only between a digital accounting system approved by the Danish Business Authority or a digital accounting system that meets the above requirements—for example, custom-developed accounting systems.It should be noted that, before the requirements take effect no earlier than January 1, 2026, for small businesses subject to bookkeeping requirements with net revenue exceeding 300,000 DKK in each of the past two years, the experience gained from implementing the rules for corporations and similar entities must be evaluated.
Enforcement of Compliance with the Bookkeeping Act
The new Accounting Act includes three types of audits aimed at:
- Companies subject to the Danish Financial Reporting Act that have not submitted their first annual report, and companies that have opted out of an audit (effective July 1, 2022)
- Providers of digital accounting systems (effective no earlier than January 1, 2024/26)
- Businesses that use a digital accounting system that is not registered with the Danish Business Authority (effective no earlier than January 1, 2024/26).
The audits may be conducted with the assistance of the company’s auditor, and, subject to agreement, this assistance may result in a statement from the auditor.
The Partnership with Admind
The new rules significantly tighten the requirements for approved accounting systems that entities subject to accounting requirements must use, as well as the requirement for digital storage of supporting documents, etc. It is recommended that companies, in consultation with their auditor, develop a plan to ensure that the company complies with the new and stricter requirements for digitizing their accounting. At Admind, we have extensive experience with the digitization of accounting records and are happy to assist during an auditor’s review of our clients’ solutions in relation to the new Accounting Act.
Admind's solutions, of course, meet all current and future requirements for digital accounting.