Accounting policy according to National Accounting Standard No. 7 – part first

photo freepic Objective of National Accounting Standard No.

7 „Changes in accounting policies, estimates, correction of errors, events following the balance sheet day – take-up and presentation.” (Official Journal of the Minister of Finance, Warsaw, on 4 January 2019, item 2, hereinafter referred to as: CRS No 7) is presented in point 1.1. This document.

It sets out the rules for accounting books and annual financial statements on the impact of changes in rules (policy)[1] accounting, changes in estimates and corrections of errors (including those made in previous financial years) and events that occurred after the balance sheet date, in the light of the provisions of the Accounting Act; in addition, the document also sets out how data are presented in financial statements, ensuring their comparability.

According to point 1.2. CRS No 7, that document specifies:

„(a) the conditions for amendments adopted by the accounting policy unit,

(b) the way in which the accounting books record the effects of changes in the accounting policies adopted, the correction of errors, including those made in previous financial years, the recognition of changes in the estimates and the accountancy of events occurring after the balance sheet date,

(c) the extent of the information disclosed in the financial statements on changes in accepted accounting policies, correction of errors made in previous financial years, changes in estimates and events following the balance sheet date,

(d) the presentation in the financial statements of comparative data ensuring their comparability. “[2]

Further to this document, it can also be read that the change in accounting policy and the correction of errors may affect tax settlements and the amount of deferred income tax; as they are discussed in National Accounting Standard No. 2 „Income tax’ are not discussed in CRS No. 7.

In addition, CRS No 7 not applicable Article 2(3) Accounting Laws of Financial Reporting Entities in accordance with International Accounting Standards, International Financial Reporting Standards and related interpretations published in the form of European Commission Regulations.

The essence of accounting policy Article 10(1) Accounting Act according to which the principles adopted by an entity should relate primarily to:

• the determination of the financial year and its reporting periods,
• methods of valuation of assets and liabilities and determining the financial result,

the keeping of accounts, including at least:

• - the establishment plan of accounts setting out the list of accounts of the master book, the accepted rules for the classification of events, the rules for the keeping of accounts of ancillary accounts and their links to the accounts of the master book,
• - a list of accounts and, when keeping accounts using a computer, a list of datasets forming accounts on IT media, specifying their structure, interconnections and their functions in the organisation of the entire accounts and in the processing processes,

• the description of the data-processing system and, when keeping the accounts using a computer, the description of the IT system, including a list of programs, procedures or functions, depending on the software structure, together with a description of algorithms and parameters and software data protection rules, including in particular methods for safeguarding access to data and the processing system, and, furthermore, the definition of the software version and the date of its operation,

a system for data protection and data collection, including accounting evidence, accounting books and other documents underlying their records.

At the same time, according to Article 5(1) The accounting laws, the adopted accounting policy document, should be ‘constantly applied, in subsequent financial years, to the same grouping of economic operations, the valuation of assets and liabilities, including depreciation or write-downs, the setting of the financial result and the drawing-up of financial statements, so that the information resulting from them is comparable for subsequent years.

The balances of assets and liabilities shown in the accounts at the date of their closure shall be recorded at the same amount in the accounts open for the following financial year.’ According to point 3.2.

CRS No 7, where the accounting rules do not regulate the classification, valuation or presentation of a particular transaction, event or condition, the head of the entity may use the National Accounting Standards or, in the absence thereof, the International Accounting Standards.

The application of National Accounting Standards is not mandatory.

CRS No 7 points 3.3 and 3.5 report what an entity should specify in its accounting policy. These are:

• the rules adopted for classifying and grouping economic events into the relevant items of financial statements according to their nature, as assets and liabilities, income and profits or costs and losses, or cash flows,
• the methods adopted for the valuation of assets and liabilities for the initial recognition in the accounts and at the balance sheet date,
• adopted methods for determining the financial result,
• the method of presentation of the information in the accounts adopted,
• the method of determining the estimated values, for example: fair value, depreciation periods or rates for fixed assets or intangible assets.

Principles and methods set out in the above points 1 and 4 they must be used continuously.

At the same time, the adopted accounting policy may establish the use of simplifications permitted by the accounting rules, provided that this does not have a significant negative impact on the fair and clear presentation of the assets and financial situation and the financial result of the entity. Simplifications may consist primarily of:

the determination of the limit of the purchase price or cost of the production of fixed assets or intangible assets below which the entity makes (not earlier than when it is put into service) a one-off write-down of such assets;

the valuation of materials and goods at the purchase price instead of the purchase price and the production in progress, with an estimated execution time less than 3 months – in the amount of direct costs of manufacturing or only direct materials or not being valued at all,

non-accounting of revenues and costs for long-term services not completed in accordance with the rules Article 34a and Article 34b Accounting Laws if the share of revenue from unfinished services at the balance sheet date is not material in all operating revenues of the reporting period.

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