The purpose of this Newsletter is to present the main modifications to Act C of 2000 on Accounting (hereinafter: ‘the Accounting Act’) published in Issue 161 of the Hungarian Official Journal. These modifications also include changes that have already become effective as of 27 November 2014.
- Based on the amendment of Section 21 of the Accounting Act on the interim balance sheet, which entered into force on 27 November 2014, the interim balance sheet must be taken into account in support of the equity as follows:
‘Section 21(7) Unless otherwise provided by law, the last financial statement or, if applicable, the interim balance sheet specified in Subsection (6) may be taken into account for the purposes of supporting the amount of equity for a period of six months following the balance sheet date.’
- Regarding the modified provisions of Section 136 on the statement and inventory of assets and liabilities, the requirement that in calculating the carrying value in the three-column statement of assets and liabilities the amount of profit or loss for the year must be transferred to retained earnings was added to Subsection (8):
‘Accounting Act, Section 136(8) The carrying value specified in Subsection (4)(a) shall be calculated in accordance with the requirements applicable to the statement of assets and liabilities included in the annual accounts of the transforming business association, to be prepared under this Act, with the stipulation that value adjustments, the revaluation reserve for value adjustments, the revaluation difference and the revaluation reserve for fair value measurement may not be presented in the statement of assets and liabilities, and the amount of profit or loss for the year shall be transferred to retained earnings.’
- The following provision concerning publication requirements was added to Section 154/B with effect from 27 November 2014:
‘(3) If it is permitted or mandatory under the relevant legislation to withdraw the independent auditor's report in respect of the annual accounts, the abridged annual accounts or the consolidated annual accounts and issue a new independent auditor's report, the economic entity shall apply the publication and deposit requirements set out herein to both the withdrawn and the newly issued independent auditor’s reports.’
- Based on Section 155/C applicable as of 27 November 2014, the economic entity shall have the repeated audit done within 90 days after the withdrawal:
‘Section 155/C If it is permitted or mandatory under the relevant legislation to withdraw the independent auditor's report in respect of the annual accounts, the abridged annual accounts or the consolidated annual accounts, the economic entity shall — unless otherwise provided by law — have the repeated audit carried out within 90 days after the withdrawal.’
- In Section 3 of the Accounting Act the following shall be added to the definition of the term ‘audit’ as of 1 January 2015:
‘Subsection (3)(2) audit findings:
errors and error effect revealed in the course of an audit which have an influence on assets and liabilities, profits or losses, and the owner's equity and which arose in the financial year (years) closed by the respective annual accounts as a result of non-compliance with or the misinterpretation of any effective legislation or the commission of any non-permitted or prohibited act. Any subsequent modification to the characteristics of an economic event that must be recorded in the books of account and is therefore documented in the form of a contract amendment or a modification to the accounting documents in respect of the financial year or years closed by the annual accounts shall also be deemed to constitute such an error or error effect.’
- As for the general rules applying to the annual accounts, the following stipulation shall be added in Section 20(5) of the Accounting Act concerning annual accounts drawn up in a currency other than EUR or USD as specified in the deed of foundation:
‘(5a) If the economic entity prepares its annual accounts in the currency specified in its deed of foundation in accordance with Subsections (3)—(5), the amount limits set out in HUF as a condition of applying certain provisions of this Act shall be taken into account after converting such amounts at the official foreign exchange rate published by the Magyar Nemzeti Bank as effective at the relevant date.’
- Within the scope of modifications affecting the owners’ equity, the regulation of supplementary payments includes cases when such payment is not made in cash. In this case, the value of the transferred asset must be accounted for in accordance with the rules applicable to sales, i.e. the amount of retained earnings must be reduced against the resulting accounts receivable. Similarly, when the supplementary payment aimed at covering losses is repaid, the rules of sales must be applied along with the movement of the asset, so the tied-up reserve must be reduced against the resulting accounts payable.
The following Subsection (7) is added to Section 37 of the Accounting Act:
‘(7) If the supplementary payment — required by law — aimed at covering the business association’s losses is not made in cash, the instrument transferred as a means of fulfilling such payment shall be accounted for in accordance with the rules applicable to sales, simultaneously with the movement of the asset, and the tied-up reserve shall be reduced against the resulting accounts payable.’
The following Subsection (10) is added to Section 38 of the Accounting Act:
‘(10) If a previously made supplementary payment — required by law — aimed at covering the business association’s losses is not refunded in cash, the instrument transferred as a means of fulfilling such payment shall be accounted for in accordance with the rules applicable to sales, simultaneously with the movement of the asset, and the tied-up reserve shall be reduced against the resulting accounts payable.’
- The paragraph defining the original (acquisition and production) cost of the assets was extended to include a definition of the original cost of assets used for the purposes of supplementary payments:
‘Section 50(10) The original (acquisition) cost of the asset received as a supplementary payment or a refund of a supplementary payment is the value of the asset specified in the resolution passed by the general meeting, the founder(s) or the shareholders’ meeting in respect of the supplementary payment or the refund of a supplementary payment.’
- The provision on the revaluation of assets and liabilities denominated in foreign currencies at the balance sheet date was completed by adding accrued and deferred assets and accrued and deferred liabilities as follows:
‘Accounting Act, Section 60(2) Foreign currency holdings, whether in cash or on account, and all receivables, including accrued and deferred assets, financial investments, securities, and liabilities, including accrued and deferred liabilities that are denominated in foreign currencies — as classified in accordance with Sections 54—55 — shall be shown in the balance sheet at their HUF value translated at the foreign exchange rate, defined under Subsections (4)—(6), in effect at the balance sheet date of the respective financial year.’
- Section 72(4) of the Accounting Act the following point (e) concerning items to be recognised as net turnover shall be added as of 1 January 2015:
‘(e) On transferring a business line in compliance with the Act on Value Added Tax, the amount of consideration received in return for the transferred business line that is in excess of the market value of the assets transferred reduced by the value of the liabilities transferred.’
- The provision on concessions recognised under other income and other charges that are not invoiced and are granted subsequently has been clarified as follows:
The following provision replaces Subsection (7) of Section 77 of the Accounting Act:
‘(7) Other income shall include concessions subsequently received (due) — indirectly related to a specific product, material, commodity or service not yet invoiced — on a contractual basis in the relevant financial year, in the amount claimed under the contract, including the amount of concessions received (due) in the framework of an indirect cash refund scheme as specified in the Act on Value Added Tax, reduced by the amount of value added tax payable.’
The following provision replaces Subsection (5) of Section 81 of the Accounting Act:
‘(5) Other charges shall include concessions subsequently granted (payable) — indirectly related to a specific product, material, commodity or service not yet invoiced — on a contractual basis in the relevant financial year, in the amount claimed under the contract, including the amount of concessions granted (payable) in the framework of an indirect cash refund scheme as specified in the Act on Value Added Tax, reduced by the deductible amount of value added tax.’