Since the activity report reflects the specific nature of the entity's activities and sets out its activities and intentions, it is a descriptive-numerary report and has an individualised character and at the same time does not have a harmonised pattern. Therefore CRS No 9 contain only indications relating to the desired characteristics, content and layout of the activity report and the rules for its preparation and presentation.
National Accounting Standard No. 9 „Activity report’ (Official Journal of the Minister for Development and Finance dated 9 January 2018, item 4, hereinafter referred to as: CRS No 9), according to point 1.1. is assistance in drawing up a report on compliance activities Article 49, Article 49b and Article 55(2) and (2a) Act dated 29 September 1994 on accounting (Journal of Laws of 2019, item 351, as amended, hereinafter referred to as the Accounting Act, which corresponds to the expectations of users.
First of all, the purpose of the activity report is to enrich the entity's knowledge by providing users with relevant information complementary to the financial statements to which it is linked and additional information facilitating the assessment of the entity, i.e. its activities, situation, intentions and prospects for development. The Accounting Act also imposes an obligation to inform in the activity report about the expected development.
When a Report Is Useful
The activity report may be considered useful when it is reliable, useful, understandable and comparable.
According to Tadeusz Waślicki's discussion: “It is credible if the information presented in it is true, objective, correct and consistent with the financial statements. Reliability... can increase information from external, recognised, reliable sources.
For example, information on macroeconomic and market conditions, external analyses, evaluations of research, statistical, advisory institutions, etc. Please note that it is imperative to provide the source of such information. The report should clearly show what constitutes facts, what interpretations, opinions and conclusions are.’[1]
According to point 4.7. CRS No 9 the information contained in the activity report is true if the facts are presented in a fair manner and the predictions are based on realistic considerations and established using correct methods.
In turn, the information contained in the activity report can be considered objective, ‘if their selection and presentation is not biased, and if both good and bad information is presented in an open and balanced manner. ... any manipulation, e.g.
by deliberately omitting, emphasising or weakening the importance of information or presenting specific issues unilaterally should be avoided."[2]
The information contained in the activity report shall be correct if it is free of errors in the choice and presentation of the information and also in the process of producing that information. They should also be verifiable.
At the same time, the activity report is understandable when using a simple language, using an appropriate, strict classification and providing a clear description and presentation of information; this may be facilitated by replacing the word description with other forms of presentation, such as tables, charts, diagrams.
According to point 4.11. CRS No 9, activity reports are useful to users if they help to assess past, present and future events relating to the units concerned, or to confirm or correct existing assessments of those events.
At the same time, the usefulness of the information "is influenced by the relevance of its choice, which allows it to focus on key issues and proper detail, which allows for a fair and clear picture of the activities, results and situations of the individual and the opportunities and threats facing it". [3]
Rules for drawing up and presenting the activity report
In Chapter V of CRS No 9 the rules for drawing up and presenting the activity report are presented. First of all:
it must be clearly identified and distinguished from other information made available by the entity by providing the name of the document, the name of the unit and the period concerned,
it should be drawn up in Polish language and currency; however, an entity may also provide a translation of the document and include in it data converted into other currencies (if the interest of users of the report is in favour of its publication in other languages and currencies),
cover the same period as the financial statements, but if, after the closing date of the reporting period and before the approval of the activity report, there have been events having a significant impact on the entity’s situation, they require due consideration,
the activity report should provide information on the entity as a whole and, where necessary, on the individual areas(s) of its activities,
In addition, it is good practice for the activity report to extend the period considered to 3 or 5 years (only information for two periods), making it possible to assess trends and trends,
it must be signed (with the date of signature) by the head of the unit and, where the unit is managed by a multi-stakeholder body, all members of that body; refusal of signature requires written justification accompanying the activity report.
Chapter VI of CRS No. 9. The introduction should include: name, legal form, seat and core capital of the entity (e.g. share capital, equity fund, founding fund), and the current composition of the bodies and their possible changes during the reporting period until the date of signature of the activity report.
By point 6.2. CRS No 9, The activity report shall present the general characteristics of the following:
1) activities and resources;
They have been discussed points 6.5 and 6.22 CRS No 9. The business characteristics should describe, in particular, its essence and specificity and the business model. Information on the legal and organisational structure of the entity (or the structure of the group and its entities in the case of the consolidated report) must also be provided. In addition, this part of the activity report should also include information on physical, human, financial and intangible resources.
2) the objectives and risks to which the entity is exposed;
According to Tadeusz Waślicki, presenting information about the objectives, the report The activities "should identify those that are the most important of the entity's management and specify how long their implementation is expected, how progress will be measured and when progress will be assessed."[4] The activity report should discuss changes to the entity's objectives, if any. In addition, in this section, the current and future risks of the entity's activities and remedies should be clearly presented.
3) the results achieved and the current financial situation;
„The result of the business and financial situation can be read, to some extent, in general, from the entity’s financial statements, on the basis of the profit and loss account, cash flow report, balance sheet, as well as changes in capital and additional information.’ [5]
- development prospects.
According to point 6.35. CRS No 9, in the activity report, the expected development of the unit is required. "It is good practice to raise projections by means of projections and projections, including key financial and non-financial metrics, enabling an assessment of the entity's prospects at least in the next year. The financial instruments to be forecast or projected should be comparable to the information in the accounts. It is also desirable to identify objectives and expectations in the longer term."[6]
sources:
- [1] Waślicki Tadeusz, “National Accounting Standard No. 9 „Activity report”, LEX.
- [2] Waślicki Tadeusz, National Accounting Standard No. 9…, ibid.
- [3] CRS No 9, point 4.11.
- [4] Waślicki Tadeusz, National Accounting Standard No. 9…, ibid.
- [5] Waślicki Tadeusz, National Accounting Standard No. 9…, ibid.
- [6] CRS No 9, point 6.35.
Author: Michał Zdanowski, tax consultant At Russell Bedford Poland. Graduate of the Faculty of Law and Administration of the University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Studies of the University of Warsaw, Graduate of the Postgraduate Accounting and Finance Studies of the Warsaw School of Economics.
During his studies, he gained experience in law and tax law firms. Since September 2013 is associated with the law firm Russell Bedford Poland. Specialises in documenting transactions between related parties.