Accounting policy in Polish enterprises

This article answers the following questions:

• What are the objectives of an accounting policy?
• When is it worth updating a company’s accounting policy?
   

Much has already been written about accounting policy: that it must exist, that it must contain specific elements… More can be read not only in press articles, but above all by looking for information at the source – whether in the Accounting Act (Article 10) or in International Accounting Standard 1 (IAS 1) and IAS 8. There is undoubtedly an abundance of materials discussing the fundamentals; therefore, instead of focusing on regulations and definitions, let us briefly consider the objectives of an accounting policy. 

Why is it worth having an accounting policy? 

Few people recognise that financial reporting combines many areas of a company’s operations, and – when used effectively – allows for a precise presentation and integration of the organisation’s achievements, covering both “hard” figures and more nuanced descriptions. A financial statement thoroughly audited by a reputable audit firm is increasingly noticed and utilised by stakeholders, which means that for the entity itself it can be – apart from being an excellent showcase of the sales process, an optimised supply chain, or an experienced workforce – an effective, memorable hallmark and a genuine business card demonstrating the entity’s high level of professionalism. 

An accounting policy that ensures clarity of procedures and processes, and translates into clear financial statements that faithfully reflect reality, may therefore demonstrate an appropriate level of financial knowledge among management and prove that decision-makers within the entity understand the needs of finance and accounting teams in terms of reporting, while also viewing the organisation holistically – as a living organism developing dynamically. High-quality financial reporting, confirmed by an audit of the financial statements concluded with an unqualified auditor’s opinion, further seals the matter – confirming the proper flow of information within the entity, management’s understanding of the purpose of reporting, and the accurate reflection of the business in the financial statements.

The objectives of an accounting policy should serve to ensure that accounting is conducted in a manner that enables sound decision-making, helping the entity to secure conditions conducive to development and long-term operations.

A properly developed accounting policy helps to capture in financial reporting, among others:  

• sales,
• methods of fulfilling the company’s obligations,
• benefits and risks transferred to the counterparty,
• purchases,
• discounts granted,
• effects of contracts concerning the right to use an asset,
• determinations as to whether a given matter is material to the company or not. 

An accounting policy is therefore essentially a set of current principles and guidelines that should accompany every enterprise from the very first economic event. This document is intended to serve as a signpost leading to high-quality financial reporting – that is, a quantified business card of the enterprise.

It is therefore worth remembering that, alongside updates to the rules applicable within the company (and as the business develops), the accounting policy should also always be updated. One should constantly remain vigilant and – if necessary – consult a statutory auditor in order to incorporate new processes and procedures into this key document on an ongoing basis.