In one of the last articles, we wrote about the National Accounting Standards. They support the correct recognition of economic operations in Poland, in the areas not specified in the Accounting Act. In this article, we focus on International Accounting Standards. You will learn what their purpose is, to what extent they apply to Polish accounting regulations and which entities in Poland need to apply them.
What are International Accounting Standards?
International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS) are a consequence of the development of the international capital market and the increasing number of international transactions. This became particularly important after the rise of the European Union and the OECD. OECD refers to Organization for Economic Cooperation and Development.
What is the purpose of International Accounting Standards?
IAS and IFRS were established to unify reporting standards of various countries. The decision to establish them was purely practical. The number of transactions and cooperation between entities from different countries has increased. Knowledge of contractors’ financial data is an important element of cooperation. The same applies to the rules and organization of the contractor’s accounting. In practice, the recognition of this data in financial statements was problematic. The differences concerned many aspects, including:
- the presentation of financial data,
- disclosure of revenues and costs in accounting books,
- valuation of assets and liabilities.
What areas are regulated by the International Accounting Standards?
International Accounting Standards define, among others:
- the presentation of financial data,
- methods of valuation of certain assets and liabilities,
- the scope of information to be disclosed in the financial statements,
- the manner of presentation of the cash flow statements.
The legal basis for the application of the International Accounting Standards in Poland
The legal basis for introducing the IAS into the EU’s legal order is Regulation 1606/2002 of the European Parliament and the Council. This is a regulation on the application of international accounting standards.
Yet, the scope of their application varies from country to country. Many countries have adopted IAS as their national accounting standard. However, this situation doesn’t apply to Poland as it has regulated these issues in the Accounting Act. If an issue is not regulated in it, the National Accounting Standards will apply. Only then should international standards be applicable.
But, there is a group of entities in Poland for which the application of IAS is obligatory.
Which entities have to apply International Accounting Standards?
Art. 55 sec. 5 of the Accounting Act indicates two types of entities for which the application of IAS is required. It is mandatory to apply the regulations of IAS when preparing consolidated financial statements in the case of:
- issuers of securities referred to in Art. 4 of Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards,
- banks.
Entities that may voluntarily apply International Accounting Standards
The legislator states who may prepare individual or consolidated financial statements under IAS. The approving authority should issue a decision to prepare such individual or consolidated financial statements.
In the case of individual financial statements, IAS may be voluntarily applied to:
- issuers of admitted securities and issuers intending to apply for their admission to trading on one of the regulated markets of the European Economic Area countries (Article 45 (1a) of the Accounting Act),
- entities included in the capital group in which the parent company prepares consolidated financial statements in accordance with IAS (Article 45 (1b) of the Act),
- branches of a foreign entrepreneur. On condition that the entrepreneur prepares financial statements in accordance with IAS (Article 45 (1e) of the Act).
In the case of consolidated financial statements IAS may be voluntarily applied to:
- issuers of securities intending to apply or applying for their admission to trading on one of the regulated markets of the European Economic Area countries (Article 55 (6) of the Accounting Act),
- lower-level parent entities that are part of a capital group in which the higher-level parent company prepares consolidated financial statements in accordance with IAS (Article 55 (7) of the Accounting Act).
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