Make business and grow (in Poland). From the accounting point of view

In Poland the accounting principles and audit requirements are set out in the Law on Accounting.

The above regulations do not differ considerably from International Financial Reporting Standards (IFRS) and in the situations not regulated by the Law these standards can be applied. Moreover, entities as well as subsidiaries of entities quoted on a recognised EU stock exchange can prepare their financial statements in accordance with IFRS.

Statutory financial statements consist of: a balance sheet, profit and loss account, additional information, comprising of an introduction to the financial statements and additional information and explanations. Entities subject to obligatory audit are also required to prepare a statement of changes in equity (own funds) and cash flow statements.

The financial statements for the year must be accompanied by a management report on activity.

The accounting records, the financial statements and the management report must be prepared in Polish and in the Polish currency.

The financial statements should be prepared within 3 months from the balance sheet date and signed by all the members of the Management Board and the person in charge of maintaining the accounting records. The financial statements must be approved by an authorised body (usually the Annual General Meeting of Shareholders) not later than 6 months from the balance sheet date.

Within 15 days from the approval of the annual financial statements, the Management Board is obliged to present the documents for court registration purposes, together with an auditor’s opinion (if the requirement of an obligatory audit is applicable), a copy of the shareholders’ resolution approving the financial statements and resolving on allocation of profits/ loss coverage, and the management report on activity.

The approved annual financial statements must be kept in the archives permanently, whereas the accounting records, inventory documentation and other source documents must be stored for 5 years.

Audit Requirements

Annual financial statements of banks, insurance agencies, investment and pension funds and joint stock companies are subject to an obligatory audit and must be published.

The audit requirement also applies to the financial statements of other entities where in the year preceding the reporting year to which the financial statements relate, two of the following three conditions are met:

a) mid year employment level of 50 or more,

b) balance sheet totals of assets and liabilities as at the year-end were at least EUR 2,5 million,

c) turnover net of VAT (revenues from sales of goods and products and financial operations) exceeding EUR 5 million.

Planned inward investment into Poland

The last few years saw a slow down in investment into Poland, not least as many Western companies started looking further East. With the unstable situation in the Ukraine it looks like Poland is once again back in the running.

Today two press articles supported the trend. Gillette is reported to be moving 250 jobs from a German manufacturing facility to its site in Łódż in Central Poland. Also PAIiZ, the foreign investment agency announced that Italian companies are looking to make four major investments next year.

And of course this year saw the opening of two Amazon distribution centres in Poznań and Wrocław clearly aimed ar servicing the German market.

With interest rates at record low levels the time has probably never been better to invest in Poland.

Professional ethics and the cultural divide

It’s that time of year again and continuing professional education rears its head. Whilst the Institute of Chartered Accountants in England and Wales (ICAEW) is satisfied with my confirmation of compliance simply by answering one question on line the Polish Chamber of Auditors requires me to sit through 40 hours of lectures per annum and sign countless forms.

This year one of the available topics was the IFAC (International Federation of Accountants) code of ethics. The lecturer started off by saying that a professional code of ethics was the result of US accounting and audit scandals of the late 90’s. And there I was thinking that the first code of ethics was published by the ICAEW way back in the 19th Century. The reality was that all of the ICAEW training and exams which I suffered in the early 1980’s had as a point of reference ethics and doing the best for the client and society as a whole. Ethics was seen as a state of mind rather than a set of prescriptions.

Of course the UK has the benefit of a legal system which is based on what a passenger on the no. 11 bus would consider to be appropriate and inappropriate. Hence a few principles and examples suffice rather than the US and Continental approach of a three inch thick rule book which at the end of the day fails to guard against fraud.

The questions raised by my co trainees last week suggested that ethics is not something which has been inculcated with “mothers milk” with most of the questions and comments being about how to circumvent regulations. But then I reflected that the users, be they corporations, banks or government do not view Polish auditors as being a true profession, rather a necessary evil. I recall 23 years ago trying to convince a sceptical President of the Polish Association of Accountants that making the Polish qualification a general business qualification based around high standards and ethics would lead to attracting high quality graduates which could only enhance professional standing. The opposite has happened. Clearly evident in the marketing efforts of the Big4 which not surprisingly position themselves in Poland as business consultants and not as auditors.

I will end by stating that practically all FTSE 100 companies have Chartered Accountants on their main board. I would suggest that few Polish quoted companies have board members bound by a professional code of ethics, which although it does not stop fraud at least makes its perpetration more difficult to hide. I wonder who the “whistle blower” at Tesco was?