Significant simplification of the financial reporting for the so-called small entities.

For whom this is intended to simplify?

The following are considered as small entities in Poland for the needs of the Accounting Act:

• companies, other legal entities, branch offices, if the financial statement of these entities is in relation to both the current and preceding financial year, and these companies fail to reach any two of the following three figures:
  • 17.000.000 PLN - total balance sheet assets at the end of the financial year,
  • 34.000.000 PLN - net revenue from the sales of products and goods,
  • 50 persons - average annual full-time employment.
• natural persons, civil partnerships of natural persons, registered partnerships of natural persons and professional partnerships which are obliged to keeping the account books.

To benefit from the simplification and obtain the status of a small entity, the board (or the approving body) should decide on the preparation of financial statements in accordance with the requirements for small entities.

It is important to emphasise that an entity which decided and prepared its first financial statements in accordance with the requirements provided for small entrepreneurs will lose the benefit of these simplifications in subsequent years only in a situation when the data in the financial statements for two fiscal years in a row exceeds two of the three volumes set out in the Act.

What is the simplification?

The detailed scope of information disclosed in the financial statements drawn up by small entities is set out in Annex 5 to the Accounting Act. The most important simplifications shall include:

• permission to prepare the simplified balance and profit and loss statement,
• a reduction in the number of specified disclosures in the supplementary notes, as no obligation to post information including the status of reserves and write-downs on receivables and inventories, value of supplementary capital and the expected distribution of profit for the fiscal year, the settlement of the main items of differing tax base and gross profit, information on joint ventures, transactions with related parties, the list of companies in which the entity has at least 20% of the shares or remuneration of an auditor.

In addition, the Act provides for the possibility to withdraw from the preparation of the statement of changes in equity (fund) and cash flow statement, as well as relief from the obligation to draw up the activity report.

It is worth noting that the values specified in Art. 64 of the Accounting Act, which defines the obligation to audit the financial statements by the auditor have not changed. Therefore, there may be a situation in which the financial statements of small entities will be subject to mandatory auditing.

Although the changes will be applicable for periods beginning on or after 1 January 2016., Now it is worth to consider the opportunity to take an advantage of the simplifications provided for in the Act.