Amendments to the Accounting Act - simplifications for small businesses

The latest amendments to the Accounting Act introduce simplifications for small entities. The amendment to the act was signed on August 12 by the President. Check what facilities will be included in the financial reporting of small businesses.

Small units according to the Act

According to the Accounting Act, small entities are:

• companies (capital, commercial, civil), other legal persons, natural persons, partnerships of natural persons, general partnerships of natural persons, partnerships and branches of foreign entrepreneurs within the meaning of the provisions on freedom of economic activity, if these entities in the financial year for which they prepare financial statements and in the previous year (in the case of entities commencing their activity - in the financial year in which they started operating), they did not exceed at least two of the following three amounts:

• PLN 17 million - for the total assets of the balance sheet at the end of the financial year,

• PLN 34 million - in the case of net revenues from the sale of goods and products for the financial year,

• 50 people - in the case of average annual employment converted into full-time jobs;

• natural persons, civil partnerships of natural persons, general partnerships of natural persons and partnerships that apply accounting principles through voluntary bookkeeping and preparation of financial statements.

Importantly, in order for small entities to be recognized as such and to benefit from simplifications, the approving body must make a decision to prepare financial statements using certain simplifications.

Amendments to the Accounting Act for small entities

Entities that meet the criteria for being considered small entities (including capital companies or natural persons keeping books of accounts) will be able to use such simplifications as:

• preparation of a condensed financial statement, i.e. a simplified balance sheet, profit and loss account and additional information with a limited number of data;

• exemption from drawing up an activity report;

• the possibility of not preparing a statement in equity and a cash flow statement.

Amendments to the Accounting Act for small entities related to the simplified balance sheet only concern disclosure of part of the information. The condensed balance sheet is as follows (Annex 5 to the Act):

ASSETS	LIABILITIES
A. Fixed assets	A. Equity (fund)
I. Intangible assets	I. Share capital (fund)
II. Property, plant and equipment, including:	II. Supplementary capital (fund), including:
- fixed assets	- excess sales value (issue value) over the par value of shares (stocks)
- fixed assets under construction	III. Capital (fund) from revaluation, including:
III. Long-term receivables	- due to the revaluation of fair value
IV. Long-term investments, including:	IV. Other reserve capitals (funds)
- real estate	V. Profit (loss) from previous years
- longterm financial assets	VI. Net profit (loss)
V. Long-term prepayments	VII. Write-offs from the net profit during the financial year (negative value)
B. Current assets	B. Liabilities and provisions for liabilities
I. Stocks	I. Provisions for liabilities, including:
II. Short-term receivables, including:	- provision for pensions and similar benefits
a) for supplies and services, including:	II. Long-term liabilities, including:
- up to 12 months	- due to credits and loans
- over 12 months	III. Short-term liabilities, including:
III. Short-term investments, including:	a) from credits and loans
a) short-term financial assets, including:	b) for supplies and services, including:
- cash in hand and on accounts	- up to 12 months
IV. Short-term prepayments	- over 12 months
C. Contributions due to share capital (fund)	c) special funds
D. Own shares	IV. Accruals
Total assets	Total liabilities

Other changes to the Accounting Act

The amendment to the Accounting Act also introduces a number of other changes, including:

• non-governmental organizations with revenues below PLN 100,000 PLN (apart from capital companies and associations of local government units), they will be able to keep a simplified register of revenues and costs instead of accounting books;

• the date of converting the amounts expressed in euro into the Polish currency (this applies to determining whether a given company is a micro entity);

• extension of the catalog of entities preparing a report on their activities (this applies to capital companies, limited joint-stock partnerships, mutual insurance companies, mutual reinsurance companies, cooperatives, state-owned enterprises, as well as those general partnerships and limited partnerships, where all partners bearing unlimited liability are capital companies, partnerships limited joint-stock partnerships or companies from other countries with a legal form similar to these companies);

• removing for most entities (except banks, insurance and reinsurance companies and credit unions) the category of extraordinary profits and losses (in connection with the repeal of Article 42 (1) (3) and (4);

• extension of the catalog of other operating costs and revenues to include costs and revenues related to random events;

• extension of the catalog of units that can apply simplifications related to the qualification of leasing contracts according to the rules in force in tax regulations.