Magdalena Ludwiczak

Statutory auditor (Poland)
Branch manager
Phone: +48 61 624 49 43

The Polish Accounting Act requires entities to draw up the notes to the financial statements in Poland in which they present transactions and accounts in breakdown by those with related parties and third parties. In the balance sheet these will be receivables, liabilities and financial assets, in the income statement – revenues and expenses, and in the cash flow statement – some of receipts and payments.  

Related parties are defined in the Polish Accounting Act to include a parent company, a significant investor, subsidiaries, co-subsidiaries, associated parties, shareholders of a co-subsidiary and parties which are under joint control with the entity (Article 3(1)(43) Accounting Act).

Parent company means an entity that exercises control over another entity. Exercising control over another entity means the ability to run the financial and operating policies of that entity in order to obtain economic benefits from its activities. The main ground for considering an entity to be a subsidiary (subordinate to the parent company) is holding shares in it. However, the mere shareholding does not always mean exercising control. To be a parent company of another entity, the latter must at the same time be able to appoint most members of its management board, supervisory board and must have majority voting rights. 

Another type of relation is through joint control. The joint control exists when a company's articles of association stipulate that control over the business activity is split. Financial and operating decisions require consent of both parties. 

Related parties also include associated parties , that is parties on which an investor exerts significant influence. This means that the investor participates in decision-making about financial and operating policy of a party, but exercises no control or joint control over it. This usually means that an investor has more than 20% of voting rights and seats in the management board. 

According to IAS 24Related Party Disclosures – related parties also include two entities which have a director or a key manager in common, provided that such a person exercises effective control over the entities. 


John Smith is the president of management board in company X and at the same time the financial director in company Y. The financial statements of company X should disclose this company's transactions and balances with company Y as a related party.

Example 2.

James Brown is a chief commercial officer in company Y and a member of the management board in company Z. However, he visits the company occasionally and does not exercise effective control over the company's affairs. Companies Y and Z will not then be related parties according to IAS/IFRS. 

The Polish Accounting Act stipulates that the appendix and explanatory notes should list transactions with an entity under control or joint control on which a member of the managerial, supervisory or administrative body of an entity or its related party exercises significant influence or in which such a member holds majority voting rights, directly or indirectly. However, there is a remark that such transactions should be disclosed only if made on terms other than market terms and if they are significant for the user of the financial statements. Such transactions should also be disclosed if made with persons related (spouse, relative, co-habitant) to a member of the managerial, supervisory of administrative body of an entity or its related party. IAS 24 requires disclosure of such information regardless of the terms and conditions of the transaction.

Noteworthy, related parties are generally commercial entities, that is, partnerships: general partnership (sp. j.), professional partnership (sp. p.), limited partnership (sp. k.), partnership limited by shares (S.K.A.), and companies: limited liability company (sp. z o.o.) and joint-stock company (S.A.). This follows from the definition of a related party set out in the Code of Commercial Companies (Article 4(1)(5)). The relations exist between companies which are owned by the same legal person (not a natural person – the companies X and Y are related if they are owned by ABC sp. z o.o., and not by entrepreneur Mr Smith).

We would be glad to offer more information if you are interested in this subject. Our auditors and consultants remain at your service to answer all questions about financial audit in Poland in our offices in: Cracow, Gdansk, Gliwice, Poznan, Warsaw and Wroclaw.