Certain Hungarian enterprises may already opt for bookkeeping according to IFRS (International Financial Reporting Standards) from 2016, while the number of IFRS transitions is expected to increase significantly as of 2017 onwards.
The local IFRS implementation definitely makes easier the life of corporations that operate in an international environment; providing better market potentials and also easier administration. As of 2017, every company that is obliged to statutory audit or part of an international group where its parent consolidates according to IFRS may introduce IFRS accounting too; which is expected to be the biggest group of IFRS appliers.
Although Hungarian book-keeping will not be a requirement for the IFRS adopters, since the determination of the tax obligations (corporate income tax, local business tax, income tax on energy suppliers, advertising tax) has to be assessed on the tax base defined by the IFRS’s. The IFRS accounting items will need to be adjusted by special modifications first to narrow the Hungarian accounting standards, then after some further adjustments the usual tax calculations need to be performed.
Although the basic principle would be to achieve similar tax results for IFRS, this may not be possible in full. Therefore, the corporate income tax of the companies implementing the IFRS is to be frozen for two tax years (the year of transition plus the + following year) (application of special minimum tax).
Given the fact that migration of an accounting system is a serious task, it is worth to crawl the expected effects in advance. It is already advisable to start IFRS bookkeeping in the pre-launch period, especially because the financial figures of the two preceding years must be presented according to IFRS as well.
The condition of the changeover is a special audit report which proves that the company is prepared for the IFRS implementation. This certifies that the company has IFRS qualified employees (or outsourced service providers) for the accounting and preparation of the financial statements, maintains an accounting policy under IFRS, possesses its balance sheets according to IFRS for the year before changeover. The changeover must be reported to the Hungarian tax authorities and the statistical office, or in some cases to the Hungarian National Bank as well at least 90 days before the transition to IFRS with the auditor’s report attached.
Therefore, preparations cannot begin early enough, and during such long and complex process professional accompaniment and consultation will be needed. Providing IFRS qualified employees that’s what may cause the biggest problem for many companies. The involvement of an experienced outsourced contractual partner, such as LeitnerLeitner’s team may provide for a solution in this, we can help in the preparation phase and in the accounting under IFRS too.
LeitnerLeitner provides IFRS accounting or IFRS audit services to Clients and ready to lead the IFRS transition with full scope accounting and tax advisory. For further information, please do not hesitate to contact us at firstname.lastname@example.org. You may also visit our webpage.