The Act of 29 September 1994 on Accounting (further referred to as “AA”) specifies accounting principles, as well as procedures for auditing financial statements by statutory (chartered) auditors.
Provisions of AA apply to Polish resident civil law partnerships, commercial partnerships and companies, including these in organization, as well as other legal persons (except the State Treasury and the National Bank of Poland) and other than partnerships organizational units without legal personality. Natural persons, as well as civil partnerships, registered partnerships and professional partnerships established by natural persons are covered by the act provided that their net income for the last financial year was at least equal to 1200000 EUR (but in case of lower income they may voluntary apply the accounting principles upon notification of a tax office appropriate for income taxation). The act also finds application to foreign legal persons, organizational units without legal personality and natural persons, who carry on business activities in Poland (personally, by an authorized person or by employees) – in respect of these activities, regardless of their income.
The AA thoroughly governs keeping the books of accounts and provides definitions for accounting purposes. Books of accounts encompass files of accounting entries, totals and balances, which constitute: a journal, a general ledger, subsidiary ledgers, assemblage (balance) of general and subsidiary ledger accounts, inventory (of assets, liabilities and equity). Books are opened at the day of starting operations and then at the beginning of each subsequent financial year and closed – at the last day of a financial year or at the last day of the entity’s operations. A financial year (applied also for tax purposes) generally is a calendar year or if so chosen – a period of 12 consecutive calendar months. For the purposes of keeping accounting books and drawing up financial statements, AA prescribes detailed rules on valuation of assets, liabilities and equity and determination of the financial result.
Under AA, financial statement should be prepared as at the date of closing books of accounts not later than within 3 months since the balance sheet day (generally, the last day of a financial year), and approved not later than within 6 months since that date. It consists of a balance sheet, a profit and loss account and additional information, including introduction to the financial statement as well notes to the financial statement, including additional notes and explanations. Sometimes also the following documents are included: a statement of changes in capital (equity), a cash flow statement and an annual report.
Audit and publication of financial statements is mandatory in case of the following entities: related entities (including annual statements of capital groups), banks and insurance institutions, securities trading institutions, investment funds, pension funds, joint-stock companies (except companies in organization), as well as other entities if at least two of the subsequent conditions were met in respect of the financial year for which the statement is drawn up: the annual average number of full-time employees amounted to at least 50, the aggregate assets value of the balance sheet at the end of a financial year amounted to at least 2500000 EUR, the annual net revenue was at least 5000000. An audit of a financial statement is performed to obtain a written auditor’s opinion determining whether the statement is correct, gives reliable and clear picture of the financial and proprietary condition and the financial result of the audited entity.
Entities which in the course of preparing their financial statements conform with International Accounting Standards (further referred to as “IAS”) must comply with AA in matters not regulated by the Standards. Application of IAS is obligatory in respect of consolidated financial statements of issuers of securities traded on a stock exchange and banks. Voluntarily IAS may be utilized for consolidated financial statements by issuers of securities intending to apply for or pending admission to trading on one of the regulated markets of the EEA and members of a capital group if a parent company prepares consolidated financial statements in compliance with IAS. The same categories of entities, may optionally utilize IAS to their own (single) financial statements.
Natural persons, civil law partnerships, registered partnerships and professional partnerships of natural persons that conduct business activities without an obligation to keep accounting books, record their economic operations by running a tax book of revenues and expenditures.