Analysis of accounting and tax aspects

The regulations allow a series of simplifications to be used provided an entity takes certain actions, often in advance. Therefore, taking time now to analyse statutory requirements in the areas listed below will be recommended.

• Determining the balance sheet date

For most entities it will be the end of the calendar year, but if an entity commenced its operations in the second half of the calendar year, and the fiscal year it has adopted is the calendar year, it may combine its accounting records for the corresponding portion of its first year of operation with the accounting records for the subsequent year i.e. prolong the first financial year. This option is certainly a beneficial one, but we must remember that in order for an entity to be able to use it, appropriate information must be included in the articles of association.

• Selecting the form of financial statements

The regulator has divided enterprises into three groups: micro, small and large ones. Under the Accounting Act, the micro and small enterprises are offered a series of time-saving practical expedients related to financial reporting. The selection of simplifications, though, requires passing an appropriate resolution prior to the commencement of financial statements preparation. The main criteria allowing to determine the type of enterprises and scope of available simplifications is presented in the table below.

MICRO ENTERPRISE

SMALL ENTERPRISE

• Verifying the obligation to have financial statements audited

Checking whether the financial statements we are going to prepare are required by the law to be audited is another crucial element of the annual closing procedure. In line with the Accounting Act, the audit obligation applies among others to entities that exceeded at least two of the three figures in the prior financial year:

a) average annual employment in FTEs of at least 50 persons;

b) total assets in the balance sheet as of the end of the financial year being a PLN equivalent of at least EUR 2,500,000;

c) net revenue from sales of goods and products and financial transactions being a PLN equivalent of at least EUR 5,000,000.

Therefore, for some entities it can be the last moment to commence the procedure of selecting an audit firm. Certain steps must be taken in this respect. For an audit to be valid ex lege, a body authorised to approve financial statements of an entity must pass a resolution appointing a statutory auditor of that entity before an audit contract is concluded.

• Determining the scope of physical count of assets

The scoping of year-end physical count i.e. determining which asset classes should be counted and to what extent is another matter of importance. Importantly, an entity can commence such physical count no earlier than three months prior to financial year-end and complete it no later than 15 days after its end.

Since both the procedure itself and the collecting of financial data, including those from prior years, are time-consuming, taking a closer look at these issues beforehand is highly recommended.