In this article we will provide detailed information about the basics of accounting, financial reporting and auditing in Hungary.
Accounting in Hungary
In Hungary the Accounting Act No. C of 2000 provides the framework for financial reporting and aims to harmonize the Hungarian regulation with the International Accounting Standards as well as with EU-wide regulations. It applies to all economic entities meaning enterprises, branches of non-resident companies, healthcare, social and educational institutions, etc. The Accounting Act does not apply to private entrepreneurs, civil law companies, building societies and to the Hungarian commercial representation offices of non-resident business associations. Some special requirements for the various groups, e.g. government agencies, attorneys at law, banks are defined in individual government regulations.
Economic entities must maintain continuous accounting records about their activities using the double-entry bookkeeping and also have to draw up an accounting policy, in accordance with the provisions of the Accounting Act, in Hungarian – with special exceptions.
IFRS bookkeeping is also available in Hungary, right from the establishment of the company or latter on by a transition from Hungarian Accounting Standards to the IFRS. In such case, special tax base adjustment items are also applicable for taxes.
Principles
Accounting principles outlined in the
Accounting Act include the following principles: going-concern, completeness,
true and fair view, clarity, consistency, continuity, matching, prudence,
grossing-up, individual valuation, accrual method of accounting, substance over
form, materiality and cost-benefit. Books are required to be kept in Hungarian
and the accounting principles of a company must be consistent from year to
year. In exceptional cases a deviation from the provisions of the Accounting
Act is allowed where the application of the relevant rules fail to provide a
true and fair value.
Financial year
The financial year for which a financial report is to be prepared shall regularly coincide with the calendar year. However, the financial year may differ from the calendar year for example due to international background, provided that the different financial year is justified by the operation of the entity (e.g. consolidated companies).
Reporting requirements
In general, the financial report must be underpinned by double entry bookkeeping whereas the books must be kept in Hungarian. The financial account may be an annual account, a simplified annual account, a consolidated annual account or for small enterprises a simplified report.
Deposit requirements
Companies with double-entry bookkeeping
registered in the register of companies shall de-posit the annual account or
simplified annual account approved by the body entitled there-unto and, in case
of statutory audits of accounting documents together with the independent
auditor’s report containing an audit certificate or qualified audit
certificate, as well as the decision on the appropriation of the after-tax
profit within 5 months from balance sheet date of the financial year in
question. The annual accounts or simplified annual accounts deposit-ed shall be
of the same form and content (text) as the one examined by the auditor.
A parent company shall deposit its consolidated
annual account approved by the body entitled thereunto, together with the
independent auditor’s report containing an audit certificate or qualified audit
certificate, within 6 months from the balance sheet date of the consolidated
annual account. The consolidated annual account deposited shall be of the same
form and content (text) as the one examined by the auditor.
The data contained in the reports deposited shall
be made available to the general public, and any person may receive information
and may make copies thereof.
The Hungarian branches of EU-based companies,
or companies based in other countries where the requirements for accounting,
depositing, auditing are similar to the EU shall de-posit the annual account,
simplified annual account approved by the parent company, together with the
independent auditor’s report containing an audit certificate or qualified audit
certificate, as well as the decision on the appropriation of after-tax profits
within 60 days from the acceptance of the financials.
Audit requirements
The purpose of an audit is to ascertain that the annual account, simplified annual account, or consolidated annual account of a company has been drawn up in accordance with the provisions of the Accounting Act and, accordingly, provides a true and fair view of the financial position and of the operations of the company (and that of the companies included in the consolidation).
Audit of accounting documents is statutory for all companies with double-entry bookkeeping except for companies fulfilling both of the following conditions:
- the company’s annual net sales (calculated for the period of one year) did not exceed 300 million forints (approx. EUR 790,000 USD 833,000) on the average of the two financial years preceding the financial year under review, and
- the average number of employees of the company of the two financial years preceding the financial year under review did not exceed 50 persons.
- by companies with double-entry bookkeeping, where an audit is obligatory required by law;
- by public-interest entities;
- by mutual savings banks;
- by consolidated companies;
- by Hungarian branches of non-resident companies;
- by companies that are permitted, under special circumstances, to derogate from the provisions of the Accounting Act for the purposes of true and fair view.
In all cases when an audit is not statutory on the basis of the Accounting Act or another legislation, the company shall be free to decide whether to voluntarily engage an auditor to review its accounting documents or not.
Where the auditing of accounting documents is
statutory, the supreme body of the company must appoint a registered statutory
auditor or audit firm.
Leitner + Leitner Tax Kft. is one of the most
influential advisory firm in CEE on the field of Hungarian and international
tax issues, while Leitner + Leitner Audit Kft. provides high quality services
to its clients on the field of accounting, year-end closing and payroll; as a
separate division we also engage statutory and merger audit services, we also
provide financial advisory for special transactions. LeitnerLeitner is a
reliable partner in national and international taxation and economic issues. If
you are planning to, or already doing business in our country, we recommend to
consider our services.
LeitnerLeitner offers high quality assistance
in accounting and auditing as follows.
Accounting, payroll and outsourcing
- Comprehensive accounting (HAS, IFRS)
- Payroll accounting, related human resources advisory and administration
- Control of accounting performed outside the country within the Group (SSC)
- Preparation and updating of accounting policies and other accounting regulations
- Services related to invoices and invoicing software
- Off/On-site accounting training tailored to your company
- Audit in accordance with Hungarian (HAS) and international standards (IFRS, US GAAP)
- Consolidation
- Transformation audit for mergers, de-mergers
- Business processes optimisation
- Conducting internal controls
- Accounting advisory services
