Are Micro and Small Entities Required to Re-Adopt Simplified Reporting Measures?

The entity's status is not equivalent to the application of simplifications

In practice, there is a frequent misunderstanding that an entity classified as micro or small automatically applies the related reporting simplifications.

In fact, as explicitly provided in the new Article 49c of the Accounting Act (effective as of 2025), the decision to apply reporting simplifications must be formally adopted by the entity’s approving body.

In other words:

• the status of an entity is determined based on its financial figures and the number of employees,
• the application of simplifications requires an explicit and conscious resolution of the approving body if the entity intends to make use of such simplifications.

Which simplifications require a resolution?

The provisions of the new Article 49c refer to the simplifications listed in Articles 46–49 of the Accounting Act.

These simplifications concern the presentation of:

• the balance sheet,
• the profit and loss account,
• the notes to the financial statements, and
• the management report.

They do not apply to the cash flow statement or the statement of changes in equity.
The reason is simple: according to Article 45(3) of the Accounting Act, these two components are not mandatory for micro and small entities, therefore, their omission does not require a separate resolution.

To illustrate this more clearly, let us consider two examples of small entities:

Example A
A small entity that:

• does not prepare a cash flow statement or a statement of changes in equity, and
• prepares a full version of the balance sheet, profit and loss account, and notes to the financial statements (in accordance with Appendix No. 1 to the Act).

In this case, the entity is not required to adopt any new resolution.
Reason:

• the omission of the two statements follows directly from Article 45(3) of the Accounting Act, and
• the remaining components are prepared in their full form, which does not require any decision by the approving body.

Example B
A small entity that:

• does not prepare a cash flow statement or a statement of changes in equity, and
• prepares a full version of the balance sheet and profit and loss account (in accordance with Appendix No. 1 to the Act), and
• prepares simplified notes to the financial statements (in accordance with Appendix No. 5 to the Act).

In this case, if the entity wishes to continue applying the simplification to the notes, it must adopt a new resolution.

Reason:

• the simplified presentation of the notes requires a resolution pursuant to Article 49c of the Accounting Act, and
• the “old” resolution remains valid only for financial statements for the financial year beginning between 1 January 2024 and 20 December 2024, in accordance with Article 14(9) of the amending act.

When is new resolution required?

If an entity has previously applied simplifications to the balance sheet, profit and loss account, or notes to the financial statements (by preparing them in accordance with Appendix No. 4 or Appendix No. 5 to the Accounting Act), it will be required in 2025 to adopt a new resolution confirming the continued application of those simplifications.

In all other cases — that is, when the financial statements are prepared in full or when the simplifications result directly from statutory provisions — no new resolution is required.

Practical Implications
It is advisable for approving bodies to review, already at the stage of preparing the financial statements for 2025, whether their entities actually apply any reporting simplifications and whether the adoption of new resolutions is necessary.
This proactive approach will help avoid interpretative ambiguities and prevent potential remarks from statutory auditors during the audit of the financial statements.