ACCOUNTING RULES
Companies established by a demerger: thresholds
With effect from 1 January 2023, the wording of the Accounting Act has been clarified to the effect that in the case of a company created by a demerger, the provisions applicable to a company established without a predecessor should be applied when determining the type of Financial Statements and the thresholds for determining the audit obligation.
Recognition of finance lease liabilities in the Financial Statements
With effect from 1 January 2023, a clarification on the recognition of finance lease liabilities has been introduced in the law, according to which the instalment included in non-current finance lease liabilities, and due in the financial year following the balance sheet date, should be recognised within current liabilities, in accordance with the general requirements for liabilities.
Accrued income and prepaid expenses
Under the simplification effective from 1 January 2023, expected grants must be accrued to the extent of costs (expenses) already allocated to the grant.
Recognition of assets held in nonprofit institutions
As of 1 January 2023, ownership interests in health, social, cultural and educational institutions should be recognised as other non-current shareholdings (until now, the law did not provide for the recognition of such ownership interests). For the owner, in addition to the presentation of the true financial position, this change also implies the valuation of the shareholding in the Statement of Financial Position.
Notes to the Simplified Annual Financial Statements
Due to EU accounting directive requirements, companies preparing simplified accounts only have to provide limited information in the Notes. However, there are accounting elections that are closely linked to taxation (e.g.: opting for accounting treatment different from the statutory requirements by applying Section 4(4) of the Accounting Act]). If the company has elected such an option, it is appropriate to provide information on this in the Notes, in line with the general provisions.
Clarification of the scope of an auditor’s opinion
The amendment clarifies the extended wording of the scope of the auditor's opinion in line with the EU Directive.
Reporting obligations
With effect from 1 January 2023, the law amendment introduces a new reporting obligation which is the equivalent of the Country-by-Country ("CbC") Report as it has been known in the tax law: the Report on the Corporate Income Tax Information. The report must be filed and disclosed in a similar way to the financial statements. We have previously reported here that the data content of the Country-by-Country Reports will have to be made public due to the amendment of the relevant European directive.
Report on the Corporate Income Tax Information
A company in the above-mentioned category should be subject to this reporting obligation if:
- it is an ultimate parent company within the meaning of the Accounting Act and its consolidated annual revenue for two consecutive financial years exceeds HUF 275,000 million;
- a stand-alone company (i.e. not a subsidiary involved in another company’s consolidation), if its consolidated annual revenue exceeds HUF 275,000 million for two consecutive financial years.
Ultimate parent companies, their consolidated subsidiaries and stand-alone companies (including their branches) that are exclusively established or have a permanent place of business in Hungary are exempted from the reporting obligation (further exemptions are available).
A subsidiary of an ultimate parent company governed by the law of a 3rd (non-EU) country that is required to prepare annual Financial Statements should be subject to the obligation to publish and make available its parent company’s Report if the consolidated annual revenue of the parent company exceeds EUR 750 million for two consecutive financial years. The same obligation applies to a branch of a stand-alone company in 3rd country if the consolidated annual revenue of the stand-alone company exceeds EUR 750 million for two consecutive financial years and if the annual net sales turnover of the branch exceeds HUF 2,400 million.
Report on the Corporate Income Tax Information is subject to filing and publication requirements similar to those for annual Financial Statements, and the companies concerned should also make the Report available on their own website or on the websites of their affiliated companies.
The preparation, publication and availability of the Report on the Corporate Income Tax Information are the joint responsibility of the members of the ultimate parent company’s or the stand-alone company’s governing body, Executive Board and Supervisory Board.
The auditor's report should state whether the company was subject to the obligation to prepare and publish a Report on the Corporate Income Tax Information for the financial year and, if so, whether it fulfilled this obligation in line with the relevant law provisions.
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This newsletter provides general information and does not constitute tax advice
