Planned simplifications in accounting for small businesses

The Ministry of Finance has prepared a draft of amendments to the Accounting Act related to simplifications for small businesses. The modifications are dictated by the possibilities introduced by the Directive 2013/34 / EU on financial statements, in force since July. The proposed simplifications for entrepreneurs have already been submitted to public consultations. The purpose of the changes is to reduce the costs of accounting.

Planned simplifications in accounting for small businesses

The amendment to the Accounting Act assumes that micro entities will prepare a report that will be limited to the profit and loss account and a very simplified balance sheet with supplementary information. There would be no obligation to prepare additional information as detailed as it is today. Simplifications can be applied while maintaining the reliability and transparency of information. This means, for example, that it is not possible to measure assets and liabilities at fair value or at the adjusted purchase price. Despite the lack of additional information, the recipient of the information contained in the report will have certainty about the methods by which the assets and liabilities were measured. These will be the purchase price or production cost, i.e. historical values. For individuals, it is less costly and easier. Importantly, the use of simplifications will not be obligatory.

Who will benefit from the changes?

The draft amendment to the act assumes, in the first step, that it will be easier for micro companies. To meet the needs of entrepreneurs, an extension of the catalog of micro units has been planned. As a result, the majority of economic entities could benefit from simplifications. Currently, a micro-entrepreneur is considered to be one who, in at least one of the last two financial years:

• employed on average less than 10 employees per year and
• achieved an annual net turnover from the sale of goods, products and services as well as financial operations not exceeding the PLN equivalent of EUR 2 million, or the sum of assets of its balance sheet prepared at the end of one of these years did not exceed the PLN equivalent of EUR 2 million.

The amendment to the act provides for the extension of the catalog of micro entities, which is understood as:

• commercial companies (partnerships and capital companies), civil partnerships and other legal persons with the exception of units of the public finance sector, as well as branches of foreign enterprises, which in the financial year for which they prepare the financial statements and in the year preceding this financial year did not exceed at least two of the following three sizes:

1. the total assets of the balance sheet at the end of the financial year were the Polish currency equivalent of EUR 350,000,
2. net revenues from the sale of goods and products for the financial year were the Polish currency equivalent of EUR 700,000,
3. the average annual employment converted into full-time jobs was 10 people,

• trade union associations, employers' organizations, chambers of commerce, foundations, charity and social welfare organizations, representative offices of foreign entities - if they do not conduct business activity,

• natural persons (including non-Polish citizens), civil partnerships of natural persons, general partnerships of natural persons, partnerships, if their net revenues from the sale of goods, products and financial operations for the previous financial year amounted to no more than EUR 2,000,000 in the Polish currency .

It is estimated that approximately 34,000 units will be able to benefit from the planned simplifications, the savings of which may amount to as much as 17 million per year.