Key changes to accounting rules as of 1 January 2023
At the start of the new year, companies should review the finance-related laws amended at the end of 2022 that they need to take into account in their operations and financial decisions.
In addition to changes to tax laws, a number of important points in the Accounting Act were also amended at the end of last year. Company executives should be aware of how to change their accounting policies and how the format and data content of their reporting obligations have changed.
Rules on the preparation of simplified annual accounts - transformation
To determine whether a company established without a legal predecessor can opt to prepare simplified annual accounts, Section 9 (5) of the Accounting Act requires, as a general rule, the pro rata calculation of net sales revenue for the year as a whole. Accordingly, if the amount of net sales revenue for either or both of the two years preceding the financial year is unknown or incomplete, the projected net sales revenues for the year and, where applicable, the net sales revenue of the previous (first) financial year (expressed as an annual figure) shall be taken into consideration.
However, these requirements do not specify how a company created through demerger should proceed during a demerger.
As of 2023, the Accounting Act is supplemented with a supplementary provision under which the form of the accounts (sales revenue, balance sheet total, headcount) of a company established through demerger has to be determined according to the requirements pertaining to companies established without a predecessor.
Waiver of additional payments, managing provisions set aside for tax liabilities in the transformation statement of assets and liabilities
The provisions of the Accounting Act valid until 31 December 2022 also specified the items in the statement of assets and liabilities that can alter the amount of the successor’s profit reserve set aside at the predecessor in case of transformation. However, the rules pertaining to the profit reserve have since changed in a number of aspects (i.e. the reserve to be set aside for tax liabilities affects the profit reserve, as does the settlement in the profit reserve of the waiver of earlier additional payments).
Deviations from the Accounting Act when preparing simplified annual accounts
In certain cases, companies preparing simplified annual accounts may deviate from the itemised requirements of the notes on the accounts as specified by law, in which case the notes must contain all of the deviations as well as their effects.
Extension of the range of data published in the IFRS annual accounts
The rules of the Accounting Act pertaining to companies preparing IFRS annual accounts have also been extended. Entities now have to publish and place into escrow their (consolidated) reports on amounts paid to governments and on corporation tax data, as well as their annual accounts.
This amendment is aimed at ensuring compliance with Directive (EU) 2021/2101 of the European Parliament and of the Council, which also required the addition of a new chapter (Chapter VI/B) to the Accounting Act.
Corporation tax data report in the annual accounts
A report containing corporation tax data has to be prepared by the ultimate parent company if its consolidated annual revenue exceeded HUF 275,000 million as at the balance sheet date in two consecutive business years. (The EUR 750 million value limit specified in the Accounting Directive has to be converted to HUF according to the provisions of Section 134/E (19) of the Accounting Act.)
An independent company not included in the consolidation is also required to prepare the report if the annual revenue in the report exceeds the above limit.
However, companies registered or with a permanent place of business or conducting business only in Hungary, and the companies preparing their reports in line with Directive 2013/36/EU of the European Parliament and of the Council are exempt from the above reporting obligation.
If the parent company is not subject to the law of an EU Member State, the report must be prepared by its subsidiary or branch office if the revenue in the consolidated financial statements exceeds the legally specified limit in two consecutive years.
The data content of the corporation tax data report is regulated by the Accounting Act in line with EU directives, under which the report shall present, among others, the amounts of corporation tax paid to various governments and data pertaining to corporation tax, in a breakdown by the countries of the group’s member companies.
Presentation of subsidies in annual accounts
Under the previous requirements of the Accounting Act, subsidies not yet accounted in full could be accounted against other revenue. From 2023, only that part of subsidies not yet accounted can be reported which is proportionate to costs (expenses) already incurred and accounted in the books.
Changes also needed to be made to the requirements pertaining to statement of assets and liabilities [Section 37 (1) (d), (2) (e), and Section 38 (3) (f)].
Presentation of leasing obligations in annual accounts
For the sake of clarity in the application of the law, the legislator has amended Section 42 (5) of the Accounting Act: the amount recognised as other non-current liabilities in connection with finance leases may not include the amount of instalments due in the following year (and thus classified as short-term).
Auditor’s report
The rules of the Accounting Act pertaining to the content of auditor’s reports have also been extended.
Under the provisions of EU directives on the auditing of the report, as well as the harmonised provisions of the relevant Civil Code, the auditor shall provide an opinion in the auditor’s report on whether the report complies with legislative requirements. Under the new rules, the auditor’s report shall contain the auditor’s statement on whether the company was obligated to publish a corporation tax report in the given business year.
26 January, 2023
