The Hungarian Parliament has adopted Bill T/4852 during its plenary session on 23th June 2015 which will modify Act C of 2000 on Accounting and other financial acts. The legislators were focusing on harmonizing the Hungarian law with EU directives and IFRS standards – the law will enter into force on 1st January 2016.
We have emphasized the major amendments in our current newsletter:
- Extraordinary items
- Dividend payments
- Significant share of ownership
- Increased value limits
- Supplementary Notes
Statements will not include extraordinary items in the same form as they did before – they need to be among the income and expenditures of financial transactions. For this reason the income statement’s pre-tax profit line will correlate with the profit on ordinary activities.
Dividends have to be displayed in the accounting records with the date of the decision, not the date of the tax year’s report (income statement) when it was approved. Accordingly, retain profit line is cancelled and the income statement’s last income category will be profit after taxes (meaning it will include only profit after taxes). The previous business year’s available accumulated profit reserve supplemented with the after-tax profit can only be paid out as dividends, profit-sharing and the yields on interest-bearing securities if the equity amount decreased by the tied-up reserve and positive valuation reserve will not drop under the subscribed capital’s amount after the recognition(payout) of dividends, profit-sharing and yields on interest-bearing securities.
Significant ownership share
In addition to these changes a new type of ownership is introduced: significant ownership share is used when ownership exceeds 20 percent in other businesses’ capital. This can be in the form of securities or other rights. The purpose of significant ownership share has to be the contribution to the company’s activities, this has to be displayed in a new row at financial investments.
Increased value limits
In order to reduce the administrative duties of companies, the value limits of annual financial statements (simplified and consolidated) have been raised in accordance with EU directives. Current value limits will be modified as follows: balance sheet total is raised from this year’s HUF 500 million to HUF 1,200 billion, the limit for revenue changes from HUF 1 billion to HUF 2,4 billion. The average employee headcount remains the same, it will be 50 people as previously.
Due to the amendment, the Supplementary Notes will have to include the type and amount of income and expenses of extraordinary amount or occurrence as described in the accounting policy. Furthermore, return calculations of financial investments need to be
demonstrated. Another requirement is to include branches, and average statistical headcount: wage costs and payroll taxes need to be shown in a breakdown table by staff groups. It is sufficient to include employees’ average statistical headcount in the simplified annual financial statement.
Should you have more questions regarding the changes of Act C of 2000 on Accounting and other financial acts, our team of experts will gladly be of your help.