Differences Between International Financial Reporting Standards (IFRS) And Polish Accounting Standards

International Financial Reporting Standards (IFRS) and Polish accounting standards differ not only in the way business transactions are recorded, but also in how a company’s financial situation is presented and assessed. In practice, the choice of accounting standards may significantly change how a company is perceived by investors, banks, and business partners.

However, it should be emphasised that, as a rule, entities operating in Poland are required to apply the Polish Accounting Act. Only after meeting specific legal requirements may certain entities prepare financial statements in accordance with IFRS. This mainly applies to listed companies, capital groups, and some entities connected with regulated markets.

The most important differences concern the valuation of assets and liabilities. IFRS widely use fair value accounting, which allows companies to present a more up-to-date picture of their financial position. At the same time, this may result in greater volatility of financial results. Polish accounting standards are based mainly on historical cost, which provides more stable but sometimes less current financial information.

These differences directly affect a company’s creditworthiness and financial ratios. A good example is leasing. Under IFRS, most lease agreements are recognised as liabilities on the balance sheet, which increases the company’s debt level. At the same time, earnings before interest, taxes, depreciation, and amortisation (EBITDA) may improve because lease expenses under IFRS are presented differently than under Polish accounting standards. As a result, the same company may appear more or less profitable depending on the reporting system used.

Important consequences also arise in the recognition of revenue. IFRS require a more detailed economic analysis of transactions, which may lead to earlier or later recognition of revenue compared to Polish accounting standards. This may affect financial results, management bonuses, company valuation, and compliance with loan agreements.

It is also worth noting that the Polish balance sheet and profit and loss account have a structure strictly defined by the Accounting Act. This means that companies have limited flexibility in modifying the presentation of financial data. IFRS provide greater flexibility and allow financial statements to be adjusted to the nature of the business and the needs of investors, provided the statements give a true and fair view of the company’s financial situation.

The differences between IFRS and Polish accounting standards also influence the attractiveness of a company for foreign investors. IFRS are considered more transparent and internationally comparable, which is why they are preferred by investment funds and international capital groups. Polish accounting standards are more conservative and more closely linked to tax regulations.