Financial Statements: What They Contain, Who Prepares and When Certified Translation is Needed

Financial statements are a key document for every enterprise, depicting its financial condition. They are not only a legal requirement for many entities but also a valuable source of information for management, investors, creditors, and other stakeholders. However, when financial statements prepared in one language must be presented in another, their certified translation becomes essential.

What are financial statements and what is their purpose?

Financial statements are a structured set of information about the asset, financial situation, and financial result of a business entity on a specific balance sheet date and for a given financial year (usually coinciding with the calendar year). They are prepared in accordance with principles defined in the Accounting Act and, in some cases, with International Financial Reporting Standards (IFRS).

The main purposes of preparing financial statements are:

• Providing reliable information about the entity's financial condition to its owners, management, and employees.
• Enabling assessment of management effectiveness and business profitability.
• Providing information for external stakeholders such as investors, lenders, contractors, tax authorities, and regulatory bodies.
• Meeting legal and reporting obligations.

Who is required to prepare financial statements?

The obligation to prepare, audit (in specific cases), and submit financial statements applies to a wide range of entities. According to the Accounting Act, these are primarily:

• Commercial companies (partnerships and capital companies), including limited liability companies and joint-stock companies.
• Other legal persons (except the State Treasury and the National Bank of Poland).
• Organizational units without legal personality that are granted legal capacity by separate regulations.
• Natural persons, civil partnerships of natural persons, general partnerships of natural persons, and professional partnerships, if their net revenues from sales of goods, products, and financial operations for the previous financial year amounted to at least the equivalent in Polish currency of 2,000,000 euros (this limit is converted to Polish zloty according to the NBP exchange rate on the first working day of October of the year preceding the financial year).
• Entities operating under Banking Law, securities trading regulations, investment fund regulations, insurance and reinsurance activity regulations, cooperative savings and credit union regulations, or pension fund organization and operation regulations.
• Municipalities, counties, voivodeships, and their associations.

Financial statements are prepared in Polish and in Polish currency. Numerical data may additionally be presented in foreign currency if required by separate regulations or if it is important for statement users.

Key elements of financial statements

Complete annual financial statements consist of at least the following elements (scope may vary depending on entity size and applicable standards):

• Balance Sheet: Presents assets (property) and liabilities (sources of property financing – equity and liabilities) of the entity on the balance sheet date.
• Profit and Loss Statement (P&L): Shows revenues, costs, and financial result (profit or loss) achieved by the entity in a given financial year.
• Additional Information: Includes introduction to financial statements and additional information and explanations that are important for understanding numerical data presented in the balance sheet and P&L (e.g., adopted accounting principles, detailed supplementary data).

Depending on the entity's size and specifics, the statement may also include:

• Statement of changes in equity (fund).
• Cash flow statement.
• Management report (for certain entities).

For several years, there have also been simplifications for micro and small entities that may prepare financial statements in limited scope.

Auditing financial statements by certified auditors

Some entities are required to have their annual financial statements audited by a certified auditor. The purpose of the audit is for the auditor to issue an independent opinion on whether the financial statements fairly and clearly present the asset and financial situation and financial result of the audited entity, in accordance with applicable regulations and adopted accounting principles.

The obligation to audit financial statements applies mainly to:

• Banks, insurance companies, investment funds, and other financial institutions.
• Public companies (listed on stock exchanges).
• Large entities that exceed at least two of the following criteria for two consecutive years:
  • Average annual employment of 50 people.
  • Total assets of 2,500,000 euros.
  • Net revenues from sales of 5,000,000 euros.
• Entities that are part of a capital group subject to consolidation.

Who uses financial statements?

Financial statements serve various groups of users, each with different information needs:

• Owners and shareholders: Assess return on investment, company value, and management effectiveness.
• Management: Uses statements for strategic planning, performance evaluation, and decision-making.
• Creditors and lenders: Evaluate creditworthiness and ability to repay debts.
• Investors: Analyze investment attractiveness and financial stability.
• Suppliers and customers: Assess business partner reliability.
• Employees: Evaluate employer stability and prospects.
• Tax authorities: Verify tax calculation correctness.
• Statistical offices and regulatory bodies: Collect data for economic analysis and supervision.

When is certified translation of financial statements needed?

Certified translation of financial statements becomes necessary in many situations related to international business activity:

• Seeking foreign investors or partners: Translated statements increase credibility and facilitate negotiations.
• Applying for loans from foreign banks: Financial institutions require statements in their language to assess creditworthiness.
• Registering subsidiaries or branches abroad: Foreign registration authorities often require translated financial documentation.
• Participating in international tenders: Tender documentation often requires financial statements in the tender language.
• Stock exchange listings abroad: Foreign stock exchanges require translated financial statements.
• Mergers and acquisitions with foreign entities: Due diligence processes require translated financial documentation.
• Court proceedings abroad: Financial statements may be evidence requiring certified translation.
• Compliance with foreign regulations: Some countries require foreign companies to submit translated statements.

In the context of international business, other documents may also require translation, such as partnership agreements or VAT invoices.

How to professionally translate financial statements online?

Financial statements contain specialized accounting and financial terminology, so their translation requires not only linguistic skills but also knowledge of accounting principles and financial terminology in both languages.

The Sworny.com platform offers a convenient way to order certified translation of financial statements online:

1. Prepare clear scans or PDF files of financial statements.
2. Submit documents through our form at Sworny.com, specifying the target language.
3. Receive offers from experienced sworn translators specializing in financial and accounting translations.
4. Choose the best offer, make payment, and the translator will begin work.
5. Receive the finished, authenticated translation electronically, with the original sent to your address.

Our translators have experience with various types of financial statements, including those prepared according to Polish accounting standards and IFRS.