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KSR 6 and employee benefits: recognition, measurement and presentation of provisions for retirement severance pay and jubilee awards in Poland

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In brief

Polish National Accounting Standard No. 6 “Provisions, accrued expenses, contingent liabilities” (KSR 6) explains the provisions of the Accounting Act in this area (point 1.2); in matters not regulated by the act, entities may apply the national accounting standards (art. 10(3) of the act). Provisions for future employee benefits, among them retirement and disability-pension severance pay and jubilee awards, are treated by the standard as accrued expenses when recognised in the books, and are shown in the balance sheet as provisions for liabilities (points 1.6(a) and 3.14, art. 39(2a) of the act). In measuring retirement and similar benefits, the entity applies IAS 19 Employee Benefits, and gains and losses from actuarial remeasurement are always recognised in the profit and loss account (point 4.7). The Ministry of Finance publishes the text of the standard (PDF, in Polish) on its list of national accounting standards.

Standard
resolution No. 3/2014 of the Accounting Standards Committee of 4 March 2014
Recognition
accrued expenses (points 1.6(a), 3.14)
Measurement
IAS 19, remeasurement in profit or loss (point 4.7)
Discount rate
corporate or government bonds, per the accounting policies (point 4.10)

On this page

This is an English translation of the Polish guide KSR 6. Quotations from Polish sources are our translation.

Status and structure of the standard

The Ministry of Finance publishes the text of KSR 6 as amended by resolution No. 3/2014 of the Accounting Standards Committee of 4 March 2014, announced by communication No. 2 of the Minister of Finance of 21 March 2014. “The amendment of KSR No. 6 aims to align the content of the standard with the amended provisions of International Accounting Standard No. 19 ‘Employee Benefits’” (§ 2(1) of the resolution). The amendment added point 1.6(e) and changed point 4.7 “to clarify that gains or losses from the actuarial remeasurement of all provisions for long-term employee benefits are recognised in the profit and loss account”.

The standard has the chapters I. Objectives and scope of the standard, II. Definitions, III. Recognition, IV. Measurement, V. Presentation and disclosure in the financial statements and VI. Examples, as well as Appendix A “Classification of provisions for liabilities” and Appendix B with a decision diagram. At point 3.14 the standard refers to Example 8 “Accrued expenses for retirement severance pay” and Example 16 “Application of the discount rate to the measurement of a long-term provision”.

Scope

  • “The standard explains the provisions of the Accounting Act of 29 September 1994 … with regard to provisions, accrued expenses and contingent liabilities” (point 1.2).
  • It also applies to accrued expenses which, under art. 39(2)(2) of the act, “arise in particular from the obligation to provide, in connection with current activities, future benefits to employees, including retirement benefits” (point 1.4).
  • “In matters not regulated by the act, when adopting accounting policies, entities may apply the national accounting standards issued by the Accounting Standards Committee” (art. 10(3) of the Accounting Act).
  • “The content of the standard is consistent with the provisions of the act and, in its essentials, with International Accounting Standard (IAS) 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ and with IAS 19 ‘Employee Benefits’” (point 1.6).

Provisions and accrued expenses

  • Provisions are, under art. 3(1)(21) of the act, “liabilities whose due date or amount is uncertain” (point 2.2).
  • Accrued expenses (bierne rozliczenia międzyokresowe kosztów) referred to in art. 39(2)(2) and (2a) of the act “are provisions directly related to operating activities, i.e. to production, sale (trade) and the after-sale phase, as well as general administration” (point 2.3).
  • Difference from IAS 19 and IAS 37. The differences concern, among other things, “the different treatment of provisions for future employee benefits, including retirement benefits”; the standard “treats such provisions at the stage of their recognition in the accounting records as accrued expenses, whereas IAS 19 and IAS 37 classify them as provisions” (point 1.6(a)). The source of this difference “is the different criterion for distinguishing provisions and accrued expenses: in IAS this criterion is the degree of certainty that the obligation will be settled, and in the act – the type of activity to which the obligating event relates” (point 1.6).
  • In the balance sheet the liabilities under art. 39(2)(2) “are shown in the balance sheet as provisions for liabilities” (art. 39(2a) of the act).

Recognition (chapter III)

  • Conditions. An accrued expense is recognised in the books on condition of “the occurrence of an event obliging the entity to provide benefits in the future” and that “a reliable estimate of the costs (or losses) necessary for the entity to meet its obligations is justified and at the same time possible” (point 3.1).
  • Employee benefits. Accrued expenses for future employee benefits “are made in particular for: unused leave, retirement and disability-pension severance pay, jubilee awards” (point 3.14(a)). Under point 3.14(c), “retirement and disability-pension severance pay and jubilee awards are long-term employee benefits that depend on length of service. Employees earn the right to these benefits throughout their employment with the entity; this gives rise to an obligation of the entity towards employees in the future”.
  • Costs. Recognising an accrued expense that relates directly to operating activities consists in “increasing operating costs (the cost of producing products, selling costs or general administrative costs, as appropriate) and accrued expenses” (point 3.4(a)). For severance pay and jubilee awards they are set “as a charge to costs directly related to operating activities in the current period” (point 3.14(c)).
  • Amounts not used. When the risk justifying the accrued expense decreases or ceases, its balance is reduced together with the operating costs of the reporting period “in which it was established that the liability related to this accrual is lower or did not arise” (point 3.8, art. 39(5) of the act).
  • Stocktaking. “At least as at the last day of the financial year, provisions and accrued expenses are subject to stocktaking by comparing the data in the accounting records with the relevant documents and verifying the real value of these items” (point 3.9).

Measurement (chapter IV)

  • Date. The entity measures provisions, accrued expenses included, “at least as at the balance sheet date at a justified, reliably estimated value” (point 4.1, art. 28(1)(9) of the act).
  • Estimate. “A reliable estimate should be made through the judgement of the entity’s management, supported by past experience of similar transactions. In some cases estimating the resources needed may require consultation with independent experts” (point 4.3).
  • Employee benefits. “The basis for measuring provisions for future employee benefits is labour law, pay regulations, collective agreements and other binding agreements between employers and employees. The estimate of the provision should take into account the employer’s mandatory charges under the legislation in force at the date of the estimate (e.g. pension and disability contributions). In measuring retirement and similar benefits, the entity applies the provisions of IAS 19 ‘Employee Benefits’, except that gains and losses from actuarial remeasurement are always taken to the profit and loss account under other operating income or other operating expenses” (point 4.7).
  • Difference from IAS 19. The standard requires gains and losses from the actuarial remeasurement of defined benefit post-employment obligations to be recognised “in the profit and loss account, whereas IAS 19 – in other comprehensive income” (point 1.6(e)).
  • Discounting. In making provisions, the time value of money is taken into account, subject to the materiality principle; the amount of the provision “should, by applying a discount rate, reflect their present value (at the date the provision is made or reviewed)”. The discount rate is set on the basis of the “market yields on high-quality corporate bonds or market yields on government bonds, depending on the choice made by the entity in its accounting policies” at the measurement date, and “The maturities of the corporate bonds and government bonds should be consistent with the estimated date of use of the provision”. The increase in the carrying amount of the provision due to the passage of time “is recognised as a finance cost in the profit and loss account” (point 4.10).
  • Tax. “Provisions are measured before income tax”; the tax consequences are the subject of KSR 2 “Income tax”, and the discount rate also “should be set before tax” (point 4.11).
  • Legislation. “Provisions are recognised and measured taking into account the legislation in force at the measurement date. If an obligation exists at the balance sheet date and its amount depends on legislation already enacted, that legislation is taken into account in the measurement” (point 4.12).
  • Review. Because circumstances may change, “at least as at the balance sheet date, the entity should review whether the provision made is justified and its amount”; “Particularly important in this review is the application of the appropriate discount rate to the measurement of the provision, if circumstances require it” (point 4.14).

Selected official data on interest rates, wages, inflation, mortality and the pension age are on the page Założenia aktuarialne (in Polish).

Presentation and disclosure (chapter V)

In the balance sheet under Appendix 1 to the act, entities other than banks and insurance undertakings show provisions for liabilities and accrued expenses under liabilities in item B.I, separating:

  • B.I.2 “Provision for retirement and similar benefits in the form of accrued expenses (made under art. 39(2)(2) of the act)”, split into long-term, “whose expected date of use is more than 12 months after the balance sheet date”, and short-term, “whose expected use will take place within 12 months of the balance sheet date”;
  • B.I.3 “Other provisions”, among them provisions in the form of accrued expenses made under art. 39(2)(2) of the act “(other than retirement and similar benefits)”, also split into long-term and short-term.

The simplified balance sheets in the act do not have this split. In the balance sheet of a small entity using the simplifications (Appendix 5), item B.I “Provisions for liabilities” separates only the item “provision for retirement and similar benefits”, without a long-term and short-term split; the balance sheet of a micro entity using the simplifications (Appendix 4) shows only “provisions for liabilities”.

In the notes the entity discloses for the provisions in item B.I: the purpose for which they were made, the balance at the beginning of the period, “additional provisions made during the period, including increases in existing provisions, e.g. as a result of their growth during the period due to the passage of time and the effects of changes in the discount rate”, amounts used, unused amounts released during the period and the balance at the end of the period (point 5.1). For each group of provisions it also discloses (point 5.2):

  • “a brief description of the nature of the obligation (liability) and of the expected timing of the resulting outflows of economic benefits”;
  • “information on any significant uncertainties about the amount and timing of these outflows”;
  • “the main assumptions, where appropriate, about future events that have been taken into account in estimating the provision”;
  • the amount of any expected reimbursement as an asset, including the amount recognised in the balance sheet.

Simplifications

KSR 16 was adopted by resolution No. 13/2025 of the Accounting Standards Committee of 2 September 2025; the standard “applies for the first time to financial statements prepared for the financial year beginning on 1 January 2026 or later, with the option of applying it earlier” (§ 1(2) of the resolution).

  • Micro and small entities may refrain from making accrued expenses relating to future employee benefits (art. 39(6) of the act), but this does not apply to, among others, capital companies (para. 7); KSR 16: “Because of the legal form, the simplification does not apply” to these companies (point 12.11). Details in the guide Retirement severance provision.
  • Materiality. “Provisions for liabilities, accrued expenses or the disclosure of contingent liabilities may be omitted if these simplifications do not have a materially adverse effect on a clear and true and fair presentation of the entity’s assets, financial position and financial result” (KSR 6, point 3.21). “This, however, requires a materiality threshold on initial recognition to be set in the accounting policies, below which provisions and accruals are not made” (KSR 16, point 12.13).
  • Discounting. “Discounting of provisions may, however, be omitted on the basis of the materiality principle” (KSR 16, point 12.14).

Sources

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