Junior Audit Manager at RSM Poland
Conducting an assets inventory check is an obligation arising from the Accounting Act (let us remind you that on September 23, 2015, a new Act dated July 23, 2015 on amendments to the Accounting Act and other Acts entered into force [Journal of Laws 2015, item 1333]). According to its provisions, at the end of a financial year, economic entities are obligated to conduct inventory checks:
a. by physical stock taking, stock evaluation, comparison of values with accounting books data, explanation and settlements of potential differences of:
- financial assets,
- tangible securities,
- tangible current assets,
- fixed assets and
- real property recognized as investments, as well as
- machines and devices recognized as fixed assets under construction;
b. through receiving confirmations on the correctness of the recognized status of these assets in the accounting books from banks and counterparts, or a justification and settlement of potential differences:
- financial assets accumulated on bank accounts or kept by unrelated entities, including dematerialized securities,
- receivables, including loans granted and
- owned assets entrusted to counterparts,
c. by comparison of accounting books data with relevant documents and verifying the following assets:
- fixed assets with difficult access,
- lands and rights qualified as real property,
- disputed and doubtful receivables,
- receivables and liabilities towards persons that do not keep accounting books,
- due to statutory titles, as well as
- assets and liabilities not listed in point a) and b) as well as those listed in point a) and b), if the inventory made through physical stock taking was not possible for justifiable reasons.
The Accounting Act states that the entities maintain the inventory check deadline (last day of a given financial year), if the fixed assets (excluding pecuniary assets or securities) - are included in the inventory not earlier than 3 months before the end of a given financial year and not later than the 15th day of the next year. The inventory check should occur through either the inclusion or a write-off of a status recognized through physical stock taking or balance confirmation - income and expenses (increases and decreases), occurring between the date of the inventory check or balance confirmation or the day of evaluating the status recognized in the accounting books, whereby the accounting books status cannot be established after the balance day.
At the same time, some groups of assets may be exempted from the provision above:
- materials, goods, finished products and semi-finished products inventory located in secured sites, included in the quality and value register - the inventory check may be conducted every other year;
- real property recognized as fixed assets or investments, as well as other fixed assets or machines and devices recognized as fixed assets under construction located in a secured site - the inventory check may be conducted every 4 years;
- goods and materials inventory (packages) included in the value register in the entity retail trade points – the inventory check must be conducted every year.
The inventory differences recognized (i.e. the differences between the factual findings and the status recognized in the accounting books) must be explained and recognized in the accounting books during the year the inventory check was conducted. In this way, the documents of the conducted inventory check and their results should be clearly related to the entries in the accounting books. Such documents should be archived for the period of 5 years.
Additionally, I would like to emphasize that following the Accounting Act, an entity director (typically the Management Board) should conclude a contract on the examination or review of a financial statement within a time that would allow for the participation of an expert auditor during the inventory check of significant assets. It is worth remembering and contacting your auditor ahead of time. The inventory check is coming really soon – as it is the end of the year.