Determining the Form of Financial Reporting: Key Aspects

Polish Accounting Act vs. International Financial Reporting Standards

Financial statements can be prepared either in line with the Polish Accounting Act or the International Financial Reporting Standards (IFRS). The choice depends on the entity’s type and on whether it is subject to the obligatory IFRS.

• Entities subject to obligatory application of the IFRS: include, among others, banks and issuers of securities.
• Entities that can use the IFRS: include, for example, issuers of securities that apply for admission to trading on regulated markets or entities that belong to capital groups in which the parent company applies the IFRS.
• Entities that use the Polish Accounting Act: all other entities must comply with the domestic regulations and are not allowed to use the IFRS at their own discretion.

Key differences between the IFRS reporting and the Polish Accounting Act

1. Structure of financial statements: the IFRS allow for more flexibility in terms of the structure of financial reports while in the case of the Polish Accounting Act, entities must stick to very strict templates.
2. Statement of comprehensive income: It is required in the IFRS but it is not included in the Polish Accounting Act.
3. No simplifications in the IFRS: regardless of their size, entities that use the IFRS must prepare a cash flow statement and a statement of changes in equity.
4. Ongoing updates of standards: entities that apply the IFRS must follow changes in the standards on an ongoing basis.

Elements of a financial statement

According to the Accounting Act, a financial statement should comprise of:

• Balance sheet
• Profit and loss account
• Cash flow statement
• Statement of changes in equity
• Additional information

Entities that apply the IFRS can use various names of individual components and must prepare, among others, a statement of comprehensive income and explanatory notes.

Annexes to the Polish Accounting Act

Various annexes to the Polish Accounting Act lay out the rules for the preparation of the financial statement, depending on the entity’s size and type:

• Annex no. 1: for entities other than banks and insurance companies. It contains the full scope of information.
• Annex no. 4: for micro-entities, with a simplified balance sheet and profit and loss account.
• Annex no. 5: for small entities, with less detailed information than in Annex no. 1.
• Annex no. 6: for public benefit organizations.

ATTENTION! There are ongoing works on changes in the accounting act regarding, among others, simplifications in financial accounting. According to the draft act, the changes will cover the definition of micro-entity and small entity (the thresholds will be increased) along with new definitions of large and medium entities. As of today, the works on the amendment of the act are carried out in the Polish Sejm and can be introduced already in 2025.

Simplifications in financial statements

Micro and small entities as well as non-profit organizations can use simplifications, such as:

• Simplified balance sheet and profit and loss account
• Lack of obligation to prepare the cash flow statement
• Lack of obligation to prepare the statement of changes in equity

The said simplifications are optional and require a resolution of the approving body.

Who is excluded from the simplifications?

• Large entities that exceed the specified limits
• Financial institutions, such as banks and insurance companies
• Issuers of securities
• Entities obligated to apply the IFRS

Materiality principle

The materiality principle allows for the use of simplifications, provided that they do not have a negative impact on the reliability and transparency of the financial statement. The materiality threshold is determined individually by the entity and set out in the accounting policy.

The choice of the correct form of financial reporting and the use of simplifications can have a considerable impact on the efficiency of financial reporting. It is important to adjust those elements to the characteristics of the entity while ensuring compliance with the applicable regulations. We encourage you to contact the experts at MDDP Outsourcing to learn the details.

author: Piotr Czarnecki, Junior Reporting Specialist, MDDP Outsourcing Warsaw

We invite you to read the remaining articles in the ‘Financial Report 2025’ series:

1. Schedule of Works on the Financial Statement: The Key to Effective Reporting
2. Determining the Form of Financial Reporting: Key Aspects
3. Audit Obligation and Selecting the Auditing Company: Key Aspects
4. Inventory of Assets and Liabilities and Their Valuation
5. Valuation of Assets and Liabilities on the Balance Sheet Date
6. Preparation and Signing of the Annual Financial Statement: A Step-by-Step Guide
7. Consolidation of Financial Statements: Key Rules and Requirements
8. E-Statements: A Guide to Electronic Reporting of Financial Statements
9. Sending a Financial Statement After the Deadline: Consequences and Procedures