Find a short summary below on what to do when a business decides to conduct its books in another currency, instead of HUF.
The first, and most important step to take, is that the company’s shareholders decide on the currency change with a shareholder resolution. The fact of the change of the currency than shall be registered by the Court of Registry and from that date on, the company may conduct its books in the currency chosen.
According to the Section 145 (1) of the Accounting Act, an annual report or simplified annual report shall be prepared by the transition date, in the currency used before the change occurred. In this case, it is advisable to switch currency at the end of the financial year, thus the creation of a separate report is not necessary. It is important to point out that the pre-transition annual report are to be published according to the general rules (last day of the fifth month following the end of the financial year).
The next step is to convert the data contained in the annual report or simplified annual report to the selected currency, and an annual report or simplified annual report, which contains the opening data, must be prepared in the selected currency.
During recalculation the following points should be taken into consideration:
- Recalculation has to be carried out at the official exchange rate published by the National Bank of Hungary using a reciprocal value. (special rule that must be pay attention to)
- Claims, foreign currency stocks, and liabilities in the chosen foreign currency shall be shown on the registered value
- The registered capital must be displayed in the chosen currency registered at the Court of Registry
During the above-mentioned recalculations, differences may arise, which should be settled as follows:
- With profit-type differences, the capital reserves need to be increased
- With loss-type differences, the retained earnings need to be reduced
The differences in the registered capital should be shown as follows:
- In case the recalculated value is lower, the capital reserve must be reduced till the amount of the capital reserve, than the retained earnings must be reduced
- In case the recalculated value is higher, the capital reserve needs to be increased
The opening annual report or simplified annual report in the chosen currency must be verified by the auditor, but does not have to be published. This annual report shall be the basic document for the opening ledger of the chosen currency.