WKB Legal Alert: Obligatory re-adoption of resolutions allowing the application of accounting simplifications when preparing financial statements for micro- and small undertakings
On 1 January 2025, a number of significant amendments to the Act of 29 September 1996 on Accounting (the “Accounting Act”) concerning the criteria for qualifying micro- and small undertakings entered into force. In addition to increasing the relevant statutory thresholds and making the qualification of a given entity as a micro- or small undertaking automatic, the amendments also have material consequences for any entity that, in previous years, already decided to apply accounting simplifications when preparing its financial statements on account of being a micro- or small undertaking. Under the new regulations, such entities must re-adopt the decision to apply these simplifications.
What was the law previously?
Before 1 January 2025, the condition for a given entity to qualify as a micro- or small undertaking was the adoption of a decision in this regard by the body competent to approve the entity’s financial statements (in the case of capital companies, the Shareholders’ Meeting or General Meeting), together with an indication of which simplifications identified in the Accounting Act the entity in question will apply. On the basis of such a decision, the undertaking’s management could then apply the appropriate simplifications when preparing its financial statements.
The decision to apply simplifications was not required to be adopted annually. In the majority of cases, this decision was effective until the entity in question ceased qualifying as a micro- or small undertaking due to crossing the relevant statutory thresholds.
What is the law now?
The amendments provide that decisions on the application of simplifications for micro- and small undertakings when preparing financial statements adopted by the body approving a given entity’s financial statements before 1 January 2025 would remain in force in relation to financial statements prepared for financial years beginning between 1 January 2024 and 31 December 2024.
egarding financial statements prepared for financial years beginning on or after 1 January 2025, it will now be necessary for the body approving the entity’s financial statements to adopt a new decision on the application of simplifications when preparing its financial statements (and, potentially, exempting the entity from the obligation to prepare an annual activity report). In the case of capital companies, such decisions should be in the form of a resolution of the company’s Shareholders’ Meeting or General Meeting.
The law does not, however, provide an express deadline by which a decision to apply simplifications should be adopted. That being said, such a decision should, in any case, be adopted before preparing the financial statements for the first financial year in which such simplifications will be applied.
What are the consequences of failing to adopt a decision on simplifications?
If the body competent to approve a given undertaking’s financial statements fails to adopt a decision to apply simplifications, the entity in question should prepare full financial statements and an annual activity report, even if it otherwise meets the statutory criteria to be qualified as a micro- or small undertaking. Financial statements prepared using such simplifications but absent the appropriate decision would violate the provisions of the Accounting Act and should not be approved or submitted to the National Court Register. Additionally, the undertaking’s manager who prepared such financial statements could face criminal liability.
How can we help?
WKB Lawyers provides commercial companies with comprehensive support and ongoing corporate advice, including in relation to closing the financial year. Our services also include the preparation of the necessary corporate documents as well as their approval and submission to the National Court Register.
If you have any questions, please do not hesitate to contact the lawyers from the Corporate Law & Governance Team: Anna Wojciechowska, Monika Lutomirska, Mateusz Taranek.