Accounting specialties for startups | News Flash

Startup, or early stage enterprise based on the Hungarian legislation, usually means a newly founded company with high growth potential. The common feature of these companies is that they can grow rapidly in a relatively short period of time with some innovation, which requires initial capital.

It is also an important feature of the so-called startups that they tend to expand to international areas quickly to build an international network.

The question is whether or not there is an accounting specialty for such companies and whether there is a generally valid accounting rule that the accountant must be familiar with in any case.

Firstly, it must be stated that there is no exact law especially for startups, although these companies are subject to the general accounting/taxation rules as any other ’normal’ business.

Nonetheless, there are some specialties that may occur more frequently for startups. Let’s go through these specialties – without the need for completeness.

Startup and international connections

A great startup accountant should be aware of the international accounting standards (IFRS, USGAAP) as the emergence of a large international investor may occur in the company’s vicinity because of the international presence and the ongoing capital requirements. These international investors may expect reporting according to the international standards. Depending on the activity of the company, the international report may contain significant deviations from the accounts compiled according to the Hungarian rules, especially in the case of activation/cost accounting.

Startup and accounting for research and development costs

As noted above, startups are characterized by innovation – developing a new idea and implementing this idea later. Therefore, it is very important for the accounting Team to be aware of the accounting and tax specialities of research and development related costs and the possible tax advantages.

Startup and Tenders / State Aid

Startups often claim domestic or European Union support to start their businesses. For this reason, it is important for you to be aware of the terms and conditions of subsidies when managing the books. For each grant, the proposer of the grant is generally required to justify the proper use of the funds, which can only be achieved by proper accounting, cost allocation and ledger separation. These rules should be laid down prior to the granting of the aid, as the subsequent dismantling of expenditure / costs may result in significant additional work.

Startup and the financing forms

Domestic or foreign investors often provide special coverage for the innovation to be developed by the startup. The adviser, who works in the background, does not just need to track the relevant transactions (capital / credit, option rights, convertible bonds, etc. ) but also, if necessary, assist the Client in finding the most optimal investment form of accounting / taxation.

Because of these specialties mentioned above, startups – especially at the beginning – should outsource their administration to a consulting company, where the mentioned accounting and taxation knowledge is provided. Moreover, in an ideal scenario, the accounting colleague of the startup can benefit an assistance of a complete tax and legal advisory team within the consulting company.

István Nemecz

Managing Director | Accace Hungary

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