Micro entities (jednostki mikro) have gained new options for financial reporting thanks to changes to the Accounting Act (ustawa o rachunkowości). The new definition of a micro entity, in force since 2025, affects which entities may use simplifications in keeping accounting books and preparing financial statements. The changes are meant to make doing business easier for the smallest entities while keeping an appropriate level of financial transparency.
Simplified financial statements of a micro entity under Annex 4 to the Accounting Act are an alternative to standard forms of reporting. The decision to use them belongs to the approving body (organ zatwierdzający), which may choose between the various simplifications available to micro entities. A proper understanding of the new classification criteria and of the procedure for adopting reporting simplifications is essential.
New definition of a micro entity in force since 2025
The amending act of 6 December 2024 amending the Accounting Act (Journal of Laws (Dz.U.) 2024 item 1863, in force since 1 January 2025) introduced fundamental changes to the classification of business entities. The new definition of a micro entity, contained in Article 3(1)(1a) of the Accounting Act, sets out precise criteria that entities seeking this status must meet.
A micro entity is an entity which, in the financial year for which it prepares financial statements and in the year preceding that financial year, did not exceed at least 2 of 3 specified value thresholds. For entities starting their business or starting to keep accounting books, the criteria are checked in the financial year in which they started their business or started keeping books
The value thresholds for micro entities have been set at the following levels:
- PLN 2,000,000 for total balance sheet assets at the end of the financial year
- PLN 4,000,000 for net revenue from the sale of goods and products for the financial year
- 10 people for average annual employment in full-time equivalents
Acquiring and losing micro entity status is based on a two-year assessment period. An entity automatically acquires micro entity status once it meets the conditions in two consecutive financial years. Losing the status works the same way – an entity loses micro entity status if, in the financial year for which it prepares financial statements and in the preceding financial year, it exceeded at least 2 of the 3 specified thresholds.
Micro entity status is acquired automatically on the basis of meeting the specified value thresholds. No additional applications or notifications to public authorities are required to obtain this status
An important change is that micro entity status is now acquired automatically – in financial statements for financial years up to 2023, a micro entity was only an entity for which the approving body had decided to apply the simplifications, and the thresholds were PLN 1,500,000 in total assets and PLN 3,000,000 in revenue. It is enough to meet the specified value thresholds, with no further formal steps. The decision to adopt reporting simplifications still rests with the entity's approving body.
The provisions on the new classification of entities in the Accounting Act apply for the first time to financial statements prepared for the financial year beginning after 31 December 2023. This means entities can use the new rules when preparing financial statements for 2024 and subsequent years.
Structure of simplified financial statements
Simplified financial statements of a micro entity prepared under Annex 4 to the Accounting Act have a much simpler structure than standard financial statements. They consist of four main parts which together give a comprehensive picture of the entity's financial position.
| Element of the statements | Scope of information | Level of detail | Mandatory |
|---|---|---|---|
| General information | Identification data and accounting principles | Basic | Mandatory |
| Balance sheet | Assets and equity and liabilities | Simplified | Mandatory |
| Supplementary information | Off-balance-sheet liabilities, loans to governing bodies, own shares | Limited | Mandatory |
| Profit and loss account | Revenue and costs | Simplified | Mandatory |
General information is the first part of the statements and contains the entity's basic identification data. It covers the business name, registered office and address, the number in the relevant court register or business register, the duration of the business (if limited), the period covered by the statements, the simplifications applied, information on the going concern assumption and a description of the accounting policies adopted. This part is informational and allows the entity preparing the statements to be identified unambiguously.
The simplified balance sheet presents the entity's assets and equity and liabilities at the end of the financial year. Its structure is much simpler than the standard formats, which makes it easier for micro entities to prepare. Balance sheet items are grouped into larger categories, which reduces the number of detailed items shown in the statements. For comparison, the full layout is discussed in our article on balance sheet preparation rules and structure.
A micro entity may choose not to prepare the standard notes (informacja dodatkowa), provided it presents the supplementary information to the balance sheet set out in Annex 4 to the Accounting Act. This significant simplification reduces the administrative burden on small entities
The supplementary information to the balance sheet (informacje uzupełniające do bilansu) is a key element of the simplified financial statements. Its scope is set out in Annex 4 to the Accounting Act and covers three groups of data: financial commitments not included in the balance sheet (including guarantees, sureties and contingent liabilities), advances and loans granted to members of the entity's governing bodies, and information on own shares.
The simplified profit and loss account presents the entity's basic categories of revenue and costs for the financial year. Its structure is much simpler than in standard financial statements, which makes it easier for micro entities to prepare. Items are grouped into larger categories while keeping the information on financial results clear. The remaining elements and deadlines are covered in our guide to micro-entity financial statements.
Exemptions and simplifications available to micro entities
Micro entities can use a number of significant exemptions and simplifications in financial reporting. They are meant to reduce the administrative burden on the smallest businesses while keeping an appropriate level of financial transparency.
The basic exemptions concern the obligation to prepare certain parts of full financial statements:
- A statement of changes in equity is not mandatory for micro entities
- A cash flow statement does not have to be prepared either
- The notes may be replaced with supplementary information to the balance sheet
- A management report (sprawozdanie z działalności) may be omitted if certain conditions are met
Under Article 45(3) of the Accounting Act, the financial statements of a micro entity do not include a statement of changes in equity or a cash flow statement (the exception applies, among others, to public finance sector entities meeting the conditions in Article 64(1)(4)). Entities may, however, prepare these elements voluntarily if they consider it useful
The exemption from preparing a management report is available provided that information on the acquisition of own shares is presented in the notes or in the supplementary information to the balance sheet. This simplification significantly reduces the burden of preparing additional narrative documents. If these concepts are new to you, start with our explanation of what a balance sheet is.
Micro entities may also omit from the management report key non-financial performance indicators related to the entity's activities. This also applies to information on employee matters and the environment, which further simplifies reporting.
The approving body of a micro entity may decide to prepare:
- A simplified balance sheet under Article 46(5)(4) of the Accounting Act
- A simplified profit and loss account under Article 47(4)(4) of the Act
- Supplementary information to the balance sheet under Annex 4 instead of the notes (Article 48(3)), and not to prepare a management report (Article 49(4))
- Financial statements with the simplifications for small entities under Annex 5 to the Accounting Act (Article 49c(2))
A micro entity may also prepare financial statements using the simplifications for small entities, applying the simplified format in Annex 5 to the Accounting Act. The decision on which format to use belongs to the approving body
The flexibility to choose the form of financial statements allows micro entities to tailor the scope of reporting to the nature of their business. The approving body can choose the solution best suited to the entity, taking into account its information needs and organisational capacity.
Procedure for adopting reporting simplifications
Adopting reporting simplifications for a micro entity requires a formal decision of the approving body. The procedure is governed by the Accounting Act, although it leaves some freedom as to the detailed organisational arrangements.
Under Article 49c(1)(1) of the Accounting Act, the decision to prepare financial statements using the simplifications is taken by the approving body of the micro entity. The decision may cover the various forms of simplification available to micro entities.
The Accounting Act does not set a specific deadline by which the approving body must decide to prepare simplified financial statements. The decision should be taken before the statements are prepared, i.e. no later than before 3 months from the balance sheet date have passed (Article 52(1)) – where the financial year is the calendar year, by 31 March of the year following the financial year
The key steps of the procedure for adopting the simplifications are:
- Checking that the micro entity criteria are met in two consecutive financial years
- Analysing the information needs of the entity and its stakeholders
- Choosing the appropriate format of the statements (Annex 4 or Annex 5)
- Adoption of a formal resolution by the approving body
- Recording the decision in the minutes of the approving body's meeting
Timing is crucial for applying the simplifications correctly. On the date the statements are actually prepared, the micro entity should already have the relevant resolution of the approving body. This means planning ahead and taking the decision before work on the financial statements begins.
The approving body is free to choose the specific form of simplification. It may decide to use the format in Annex 4 to the Accounting Act, intended for micro entities, or the format in Annex 5, intended for small entities. The choice should take into account the nature of the entity's business and the needs of users of the statements.
The approving body's decision may cover one financial year or be binding on the entity for subsequent years, depending on how the resolution is worded. If no specific year is stated, the decision applies until it is changed
Template resolution and its time scope
The template for a resolution on preparing simplified financial statements and its time scope are not precisely regulated in the Accounting Act. This leaves approving bodies some freedom in how they word decisions on reporting simplifications.
The current rules do not prescribe a specific resolution template, which means the approving body can word it as it sees fit, while keeping the required substantive elements. The resolution should clearly state the scope of the simplifications applied and the legal basis for the decision.
The time scope of the resolution can be set in two ways:
- Annual resolution – covers a specific financial year, stating the year for which simplified financial statements will be prepared
- Multi-year resolution – applies to subsequent years without stating a specific financial year
A limited liability company (sp. z o.o.) running a trading business adopted a resolution to prepare simplified financial statements under Annex 4 to the Accounting Act "starting from the 2024 financial year". This wording means the resolution applies to subsequent years until the approving body changes it.
Where a resolution expressly refers to a specific financial year, new decisions will have to be taken every year. This gives more control over the reporting process but requires the approving body to adopt resolutions regularly.
If the wording of the resolution shows that it is binding on the entity for subsequent years, a new resolution will only be needed if the scope of the reporting simplifications changes. This reduces the administrative burden of taking a decision every year
Recommended elements of a resolution on preparing simplified financial statements:
- The legal basis for the decision (the relevant provisions of the Accounting Act)
- Confirmation that the micro entity criteria are met
- The specific format of the statements (Annex 4 or Annex 5)
- The period for which the resolution applies
- The persons responsible for preparing the statements
In practice, micro entities often choose a multi-year resolution, which reduces the administrative burden and ensures continuity in applying the reporting simplifications. This approach is particularly justified for entities with a stable financial position that do not expect to exceed the value thresholds in the coming years.
Practical aspects of preparing simplified financial statements
Preparing simplified financial statements of a micro entity involves a number of practical aspects that affect the quality and usefulness of the financial information presented. Organising the reporting process well and ensuring compliance with the Accounting Act are essential.
The first step is to check the entity's current micro entity status. You need to check whether the entity still meets the statutory criteria by comparing current figures with the statutory thresholds for two consecutive financial years.
Key elements of preparing the statements:
- Checking micro entity status against the value thresholds
- Confirming that the approving body's resolution is in force
- Preparing accounting data in line with the reporting requirements
- Preparing each element of the statements in the correct format
- Checking that the information presented is complete and consistent
Preparing simplified financial statements requires observing all the basic accounting principles, even though presentation is simplified. The data must be reliable, comparable and understandable for users of the statements
Pay particular attention to the supplementary information to the balance sheet, which for micro entities replaces the standard notes. The scope of this information is set out in Annex 4 to the Accounting Act and is closed – it covers only the items listed below.
The supplementary information covers:
- The amount of financial commitments not included in the balance sheet (debt financial instruments, guarantees, sureties, contingent liabilities), stating the nature and form of collateral on assets
- Separately – commitments concerning pensions and related or associated entities
- The amount of advances and loans granted to members of the administrative, management and supervisory bodies (interest rate, main terms, amounts repaid, written off or waived)
- Commitments entered into on behalf of members of these bodies by way of guarantees and sureties
- Information on own shares (reason for acquisition, number, nominal value, proportion of share capital)
Quality control of the statements involves checking compliance with formal and substantive requirements. Check that all required elements are complete, that the calculations are correct and that the data agrees with the accounting records.
Simplified financial statements of a micro entity are subject to the same approval and publication requirements as standard financial statements. The approving body must approve the statements within 6 months of the balance sheet date (Article 53(1))
Timetable for preparing simplified financial statements:
- By 31 January – preparing preliminary accounting data
- By the end of February – preparing a draft of the statements
- By 31 March – review, corrections, and preparing and signing the statements (statutory deadline under Article 52(1))
- By 30 June – approval of the statements by the approving body
- Within 15 days of approval – filing the statements with the KRS (National Court Register) (Article 69(1)); entities outside the KRS send them to the Head of KAS (National Revenue Administration) (Article 27(2) of the CIT Act, Article 45(5) of the PIT Act)
Documentation of the reporting process should cover all significant methodological decisions and the reasons for the solutions applied. It is particularly important to document the basis for applying the simplifications and the check that the micro entity criteria are met.
