Material changes to accounting rules in 2024
Attention! New rules affecting auditing, accounting and taxation entered into force in 2024 under the changing Accounting Act
At the beginning of the new year, businesses should consider which financial legislation will be amended at the end of 2023 that they will have to take into account in their operations and financial decisions.
In addition to the changes in tax laws, which we reported on in detail in our previous newsletters, the Accounting Act was also amended at the end of last year on several important points, so it is important for company managers to know how to change their accounting policies, as well as how the form and data content of their reporting obligations will change in the new financial year.
The changes also affect the company's audit obligations, which are summarised below:
Auditor's choice
In the case of companies subject to audit, when selecting an audit service provider, according to the new regulation, a staff member or auditor personally responsible for carrying out the audit must also be appointed at the same time as its election .
Mergers&Acquisitions companies: cross-border conversion
Act CXXIV of 2021 on the Cross-border Conversion, Merger, Division and Other Legislative Amendment of Limited Liability Companies contains several special provisions – other than exclusively domestic transformations, mergers and divisions – that must also be taken into account when performing accounting tasks for cross-border conversions, mergers and divisions.
The amendment states that, in addition to the provisions of the Act on Accounting for Conversion, the provisions of the Act on Cross-border Conversions, Mergers and Divisions of Limited Liability Companies shall also apply. Such requirements include, for example, that the conversion plan should include:
- special privileges granted to members of the administrative, supervisory and controlling bodies and senior employees of the company, including any incentives or subsidies that the company may have received in the departure Member State during the previous 5 years;
- a detailed offer of financial compensation to those who voted against conversion;
- the likely impact of the cross-border conversion on employees;
- where necessary, information on the procedures for establishing arrangements for employee involvement in the definition of employee participation rights in the successor company.
New sub-case of separation: detachment
As a sub-case of separation, a new concept is introduced into the division rules of the Civil Code, namely the institution of separation. In the course of a separation, the owner of the mass of assets detached from the assets of the predecessor legal person, organized into an independent legal person and registered as such, becomes the owner not of the members of the predecessor legal person, but of the legal person itself, which continues to operate or sell it in this form.
In the context of a separation, the execution of the transfer of assets (assets and liabilities) and the entry in the books of shares received in return shall be recorded by the proper application of the accounting rules applicable to the formation of companies.
In the case of separation, the division of property takes place exactly as in other cases of separation, the members (as long as they remain members) cannot reclaim or export the assets belonging to the assets of the legal person.
The range of micro-enterprise simplified annual report is expanded:
The amendment to the Act on Accounting expands the scope of micro-enterprise persons entitled to prepare annual financial statements. A non-audited entrepreneur may prepare its simplified annual report if, at the balance sheet date for two consecutive financial years, any two of the following three size indicators do not exceed the following limits:
- balance sheet total HUF 150 million (previously HUF 100 million)
- Annual net sales revenue HUF 300 million (previously HUF 200 million)
- The average number of employees in a financial year is 10.
Deferred tax appearing in the Report
A deferred tax asset is the portion of tax that is repayable in the reporting period of the subsequent financial year(s), while a deferred tax liability is the portion of tax payable in the reporting period(s) of the following financial year(s). However, only that expected realisation in the subsequent financial year(s) (the carrying amount of the deferred tax asset or deferred tax liability) may be disclosed in the report. Therefore, the calculated value of the deferred tax asset or deferred tax liability should be revalued on a financial year due to changes in the management environment.
From 1 January 2024, the company may, at its discretion, show the deferred tax asset/liability in its financial statements, regardless of whether it prepares IFRS financial statements or not. Important: The deferred tax asset/liability has also been included in the balance sheet of the annual financial statements and in the layout of the profit and loss account.
Our more detailed professional newsletter about the latest legislative changes related to deferred tax will be ready soon.
Corporate Income Tax (TAO), Small Business Tax (KIVA)
Our newsletter on detailed tax changes can be found HERE: https://vgd.hu/hirek/szakmai-cikkeink-hirleveleink/kihirdetesre-kerult-az-oszi-adocsomag-mik-a-legfontosabb-valtozasok-tarsasagi-ado-globalis-minimumado-energiaellatok-jovedelemadoja-es-a-kisvallalati-ado
In relation to which new information:
- Adjustment items for the Small Business Tax Base (KIVA)
According to the legislative amendment, the amending items not only of the corporate tax base, but also of the small business tax base must be presented in the notes to the financial statements.
- Corporate tax information report
Under Directive 2021/2101/EU of the European Parliament and of the Council amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches, multinational undertakings or individual undertakings with a turnover exceeding EUR 750 million are required to disclose corporate tax information in a separate report.
The provisions on the Corporate Tax Information Report (CBCR) should first apply for the financial year starting on or after 22 June 2024.
In line with this, as a result of the legislative amendment, a new Chapter VI/B will be added to the Accounting Act, in which the requirements for reporting income tax information are formulated.
A precise and clear definition of related concepts is an essential condition for the proper application of the new standards.
Different accounting for return fees for recyclable products
From 1 January 2024, DRS, the redemption system for products with mandatory return fees placed on the domestic market will enter into force, the details of which are summarized here:
In connection with the regulation, certain rules of the Accounting Act have also been amended both for the fee of non-reusable products that must be returned, for reusable products, and for products with a voluntary return fee undertaken by manufacturers. If you are interested in further details about this, please feel free to contact us.
Compensation of losses, waiver of dividend claims: the circle of users has expanded
The current provisions of the Accounting Act contain accounting rules for claims arising from supplementary payments made to make up for losses and for the waiver of claims arising from dividends. Some of these provisions have so far only referred to the company. The amendment extends the scope of those applying these provisions to entrepreneurs in general, which includes, among others, cooperatives in addition to business associations.
Section 37(1)(h) of Act C of 2000 on Accounting states that the amount of liability forgiven due to dividends, if the owner (member) of the company waives his claim arising from approved dividends, shall be shown as an increase in retained earnings at the time of remission.
Thus, in the above regulation, the phrase "owner (member) of a company" is added.
Building law
Act XXXIX of 2023 on amendments to laws to increase the competitiveness of the economy amended Act V of 2013 on the Civil Code (hereinafter: Civil Code) with effect from 24 June 2023 and introduced a new legal institution in the Civil Code, the right of construction.
Based on the provisions of the Civil Code, the holder may establish or utilize a building on or under the surface of the property due to his right to build it. In doing so, he is entitled to construct or cause to be erected the building and, for this purpose, to use the property, and to own, use and collect benefits from the building constructed or already existing on the property.
From 2024, new accounting rules have been introduced in relation to building rights, which must be registered as property rights related to real estate under tangible assets. For the owner of the property, the consideration for the sale of the building right is recorded as the net turnover of the sale, but since the right to build can be stipulated for a fixed period and covers several years, it must be accrued in time – it must be dissolved evenly over the period covered by the contract. The rent of the "building right" regularly invoiced to the customer as a recurring service must be presented in the books as a service used.
Sustainability reporting requirements (CSRD Directive)
A new chapter is added to Act C of 2000 on Accounting, which lays down detailed rules for sustainability reporting, thus defining the corporate scope subject to reporting, the data content of the report and the method of separating the report within the annual report.
A new chapter also contains provisions regulating the scope of companies required to prepare consolidated sustainability reports and the data content of the report, on the one hand, and the method and data content of the assurance report provided by an auditor on the sustainability report, on the other.
Chapter III/A of the Accounting Act. The requirements will be introduced in a staggered manner and the obligation will apply for the first time from the financial year starting on or after 1 January 2024. Companies covered by the CSRD Directive are required to provide sustainability reporting on information on environmental and social issues, human rights and governance factors that affect them.
