Archaic accounting law means double the work
Since Parliament passed the country's first accounting law in 1994, international accounting firms have struggled to interpret a law they say is too archaic to account for the complexities of modern, international business.
The vagueness of the law regulating the accounting sector is a major problem for international accounting firms doing business here, said Maria Rzepnikowska, president of Deloitte & Touche Audit Services.
In the five years since the accounting law was introduced, Poland's economy has matured. Companies are evolving and continually looking for new ways to compete, such as through mergers and acquisitions. Unfortunately, despite three subsequent amendments, the existing law doesn't explain how mergers and acquisitions are to be accounted for. It also doesn't specify how a consolidated balance sheet for a group of companies within one holding should be executed.
"Economic life surpasses the development of accounting rules," Rzepnikowska said.
In cases where a sector isn't covered by the law, Polish firms said they turn to the international accounting standards (IAS), a set of rules established by the London-based International Accounting Standards Committee (IASC). Firms doing business in the United States or that have U.S. investors said they follow U.S. GAAP accounting rules.
Whatever the method used, accounting and auditing companies have to go about their jobs in such a way that in the end a true and reliable portrait of the company is presented. Of the 13 international accounting firms included in the List, most of them are auditors. The Big Five Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers all regard auditing as their main sphere of business.
"If an audit is to be reliable and show a true view of the company, then next to the Polish law standards, international accounting standards have to be used and at the same time constantly checked against Polish law to see whether everything is consistent," Rzepnikowska said.
Companies listed on the Warsaw Stock Exchange (WSE) create additional work for accountants and auditors, as the Securities and Stock Exchange Committee (KPWiG) obliges many quoted companies to publish differences between Polish and international accounting standards. This applies particularly to companies on the primary market and Polish companies that are present on stock exchanges abroad, said Janusz Siatkowski, KPWiG's deputy press spokesman.
Some representatives of accounting companies criticized the practice. "An unnecessary difference between the demands of KPWiG and the accounting law should be particularly critically evaluated, as publicly-traded companies are forced to publish the same financial reports many times," according to BDO, an international accounting company established in Poland in 1991.
Europejski Fundusz Leasingowy (EFL), one of the biggest leasing companies in the country, which is also listed on the WSE, is an example of a company that publishes two reports one in compliance with Polish law and the other in compliance with international accounting standards.
The two reports provide a more reliable view of the firm's financial situation, representatives of EFL said.
The main difference between the two accounting standards is that according to the Polish model, the fee that a lessee pays is deducted from the leasing company's costs, said Artur Placzynski, an EFL analyst. According to U.S. GAAP, only the interest rate paid by the lessee is deducted from the costs of the leasing company, he added. As a leasing company earns primarily on interest rates, and not on the value of the product leased, U.S. GAAP reflects the actual financial situation of a company.
Such a system, then, creates more work for accountants who have to make double calculations, for auditors who have to check two systems, and for companies themselves as they have to understand two sets of information.
Until last year, the lack of a Polish translation was also a major obstacle in implementing the IAS for many accounting firms, Rzepnikowska said. Also beginning last year, all certified auditors were obliged to take part in IAS training, she said.
Now, with a fresh set of amendments to the current accounting law in parliament, the confusion surrounding the original law is expected to diminish.
The Sejm Public Finance Committee is expected to finish work on the amendments within the next two weeks. The MPs project is not completed yet, but the government project, which the parliamentary project is based on, provides for many issues previously not accounted for, such as leasing, consolidated balance sheets, and financial reporting on mergers and acquisitions.
"The new accounting law to a large extent conforms to international standards," said Kristof Zorde, managing partner at BDO Polska.
The introduction of the law is, however, being delayed. The amendments were expected to be implemented at the beginning of 2000. So far nobody can tell when it will pass and simplify the work of accountants and auditors.
