Obligation to draw up a report on the entity’s activities for 2023

The management’s report on activities is an integral part of a financial statement. However, it constitutes a separate document. Such report describes and provides an assessment of the current equity and financial situation of the entity, as well as presents the performance of activities during the reporting period. It constitutes a tool used in the communication between the management board and the stakeholders. It contains information on risk factors and a threat analysis. What elements and information should be included in the management’s report on activities, and what is the deadline? You will find the answers to these questions further in the article. 

Pursuant to Art. 49 section 2 of the Polish Accounting Act, the management’s report on activities should at least contain the following information regarding:  

1. events that have a major impact on the entity’s operations and that occurred in the financial year as well as after the financial year by the date of approval of the financial statement; 
2. the expected development of the entity; 
3. more important accomplishments in the scope of research and development; 
4. the current and the expected financial situation; 
5. own shares, including information on: 

1. the reason for the purchase of own shares made in the financial year, 
2. the number and nominal value of shares acquired or disposed of in the financial year, and in case of lack of nominal value – the accounting value thereof, as well as on the portion of share capital that the said shares represent, 
3. in case of acquisition or disposal for remuneration – the equivalent of those shares, 
4. the number and nominal value of all acquired and retained shares, and in case of lack of nominal value – the accounting value thereof, as well as on the portion of share capital that the said shares represent; 

6. branches (plants) owned by the entity; 
7. financial instruments within the scope of: 

1. risk: price changes, credit risk, risk of major interruptions of cash flows, and loss of financial liquidity, that the entity is exposed to, 
2. the purposes and methods of financial risk management adopted by the entity, including methods used to secure important types of planned transactions for which hedge accounting is used. 

If there is a correlation between the values indicated in the annual financial statement and the information included in the report on operations, the report on operations should provide references and explanations to amounts disclosed in the financial statement.  

The report on operations should also cover — if it is relevant for the assessment of the entity’s development, performance and situation — at least the following:  

1. key financial performance indicators related to operations of the entity; 
2. key non-financial performance indicators connected with the operations of the entity and information regarding employees and the natural environment. 

When preparing the report on operations, one may use the information provided in NAS no. 9 “Report on operations”.  

Deadline for the report on activities 

The management’s report on activities is an integral part of a financial statement. However, it constitutes a separate document. As a component of the financial statement, the deadline for its preparation has been indicated in Art. 52 section 1 of the Polish Accounting Act, according to which the entity has 3 months from the balance sheet date to prepare the financial statement, in case of entities for which the financial year corresponds to the calendar year. The management’s report on activities must be drawn up and signed by 31 March. On the other hand, the approval should take place within 6 months from the end date of the financial year. The report on operations must be submitted to the National Court Register within 15 days from the date of approval.  

Entities obligated to prepare the management’s report on operations 

 Pursuant to Art. 49 section 1 of the Polish Accounting Act, the following entities are obligated to prepare the report on activities:  

• limited companies 
• limited joint-stock companies 
• mutual insurance companies 
• mutual reinsurance companies, 
• cooperatives, 
• special open investment funds, closed investment funds and alternative investment companies, 
• state-owned enterprises,  
• general partnerships and limited partnerships of which all the partners incurring unlimited liability are joint-stock companies, limited joint-stock companies or companies from other countries with a similar legal form to such companies 

Entities with the status of a micro and small company are an exception. Such entities can prepare reports on activities, if they provide details on acquisition of own shares in the additional notes. However, if a micro-entity does not prepare additional notes, the information on acquisition of own shares (stocks) should be presented in the supplementary information to the balance sheet.  

The report on operations is drawn up and signed only by the head of the entity. The person entrusted with bookkeeping has been excluded from this obligation by the legislator (except for a situation when the a/m person is also a member of the management board).  

Author: Sylwia Zatorska – Accountant at the MDDP Outsourcing office in Warsaw 

Source: Accounting Act of 29 September 1994