In our newsletter below, you will find a summary of the most important changes of the Act on Accounting from 2020. The primary purpose of these amendments is to approximate the domestic requirements to the international (IFRS) standards.
Changes in revenue recognition
New rules have been placed in accordance with sales revenue recognition from 1st January 2020, but they can be applied only to well-defined group revenue. The new requirements were identified on the base of the International Financial Reporting Standards (IFRS). In case of those contracts that are concerning two or more financial year and they are closely linked (project contracts) it must be used accruals (passive or active) in order to harmonize the revenue and costs of actually executed transactions between years. The application of the new requirements will be mandatory in the financial statement of 2020, with the exception of contracts that were entered into before 1st January 2020, but the companies can depart from this with a decision in accounting policy.
Changes in provisions
Provisions for expected liabilities have been expanded from 2020, companies have to make provision for future losses from disadvantageous contracts. This option is available for the 2019 financial year, as well.
Those contracts are disadvantageous, which are likely cause loss, or it can not be terminated without legal consequences. It is necessary to estimate the expected loss.
Changes in equity
The change in equity has to be posted in the books of the limited liability companies, stock companies, other companies (if they are subject to company court registration) immediately if it is different from the date of registration at the Company Court. It means, that the companies can determine the date of the capital increase in the future, so the change does not take effect with the registration of Company Court. However, in the case of a capital reduction (especially a mandatory capital reduction), the company will decide to comply with the mandatory rules governing its operation, in which case the date (scope) of the change cannot be specified.
Abandonment of the supplementary payment
The owners have the opportunity to disclaim the repayment of the previously paid supplementary payment if it is not necessary anymore for the replacement of the losses, in this case, it has to be reconciled from the tied-up reserve to the retained earnings. This provision shall first apply in the financial statement of 2020, but it may also apply in 2019.
The „differences” column of the draft Statement of Assets and Liabilities of Business Associations Established by Way of Transformation contains the amount of supplementary payment that was transferred into retained earnings if the owners (members) of the company disclaimed its repayment during the transformation.
Sole proprietorship and limited liability companies established by private entrepreneurs
In the future, private entrepreneurs can establish sole proprietorship and limited liability companies in order to continue their activity and it will belong under the Act on Accounting. Sole proprietorship and limited liability companies established according to Act on Private Entrepreneurs and Sole Proprietorships shall prepare an opening balance sheet with effect from the date of foundation in accordance with Act on Accounting with the proviso that the value of assets and liabilities shown in the opening balance sheet need not be verified by an auditor.
Changes in transformations
According to the subsection (6) of section 4 of Act on the Transformation (Act CLXXVI of 2013), the draft statements of assets and liabilities and the draft inventories of holdings shall be examined by an auditor if the legal person undergoing transformation is subject to statutory audits under the Accounting Act (If at least one of the legal persons participating in the merger is a legal person subject to statutory audits under the Accounting Act, each draft statement of assets and liabilities and each draft inventory of holdings shall be examined by an auditor). The final statement of assets and liabilities shall be audited in every case.
The legal person undergoing transformation (including mergers and divisions) may specify the date and time when the legal effects of transformation shall take effect, however, it may not antedate the date of de-registration of the predecessor company.
If the legal person undergoing transformation did not define the date of transformation or transformation is registered at a later date, the date of transformation shall be the date of the de-registration of the predecessor legal person. The de-registration of the predecessor legal person and the registration of the successor legal person may not be on the same day.
One lump sum as depreciation
The acquisition value of concessions and similar rights, intellectual property and tangible assets with an original or production cost increased from 100,000 forints to 200,000 forints, depending on the company’s decision be claimed in one lump sum as depreciation upon the commencement of use, the accounting policy has to be modified to apply this.