Accounting and bookkeeping in Hungary are regulated by the Accounting Act and the statutes issued by the Ministry for National Economy. In addition to the Accounting Act, some special rules apply to financial institutions, insurance companies, state budget organisation and municipalities. Hungarian accounting regulations are harmonised with Directives 4 and 7 of the European Union and other international accounting principles.
The Act applies to all business associations, but does not apply to individual entrepreneurs, companies without a legal personality, building communities or Hungarian commercial representations of businesses registered abroad.
Accounting records and the financial report have to be prepared in Hungarian and in accordance with accounting principles.
Business associations are required to prepare a business report on each business year, the form of which depends on the net turnover, the balance sheet total, the number of employees and the limits thereof.
Businesses have to support their reports with double-entry bookkeeping.
Required structure of the chart of accounts:
- Account classes 1–4 contain balance sheet accounts, and within this, classes 1–3 for assets accounts and class 4 for liability accounts. These classes of account ensure that the data to prepare the balance sheet are available.
- Account classes 5 and 8–9 contain the data for profit and loss statement and retained earnings for the year. Account classes 5–8 contain costs and expenses; class 9 is where sales and other revenues, proceeds from financial transactions and extraordinary revenues are reported.
The accounting policy has to be incorporated in writing within 90 days of the establishment of the business association.
Requiments for reports
Business associations are required to prepare a report on every business year in Hungarian. The annual report must give a true and fair view of the holdings of the economic entity and its contents (assets and liabilities), its financial standing and profit or loss.
The form of the report depends on the net turnover, the balance sheet total, the number of employees and the limits thereof.
A company using double-entry bookkeeping may prepare a simplified annual report if any two values of the following three limits are not exceeded in two consecutive years on the balance sheet date:
a) balance sheet total: HUF 500 million;
b) annual net revenue: HUF 1,000 million;
c) average number of employees during the business year: 50.
A consolidated annual report and a consolidated business report are required by any business that qualifies as a parent company in its association with one or more businesses, except if any two values of the following three limits are not exceeded in two consecutive years on the balance sheet date prior to the business year:
a) balance sheet total: HUF 2,700 million;
b) annual net revenue: HUF 4,000 million;
c) average number of employees during the business year: 250.
The consolidated report has more detailed data on the balance sheet and profit and loss statement than the annual report. The consolidated annual reports consist of the consolidated balance sheet, the consolidated profit and loss statement and the consolidated annexes. The consolidated annual report has to represent the assets, financial and income situation of the businesses involved in the consolidation as if they operated as a single company.
Publication of the report
Businesses obligated to publish their report can fulfil their obligation by sending:
- the annual report, the simplified annual report or the special simplified annual report together with
- the decision on the utilisation of the profit/loss after taxation,
- the receipt issued by the Hungarian State Treasury confirming payment of the HUF 3,000 publication charges, and
- the independent auditor’s report by businesses obligated to perform auditing
- attached to the completed electronic form downloaded from the website of the Service of Company Information and Electronic Company Registration (Company Information Service).
to the Company Information Service by the last day of the fifth month following the balance sheet date.
Business associations operating on the basis of double-entry bookkeeping are required to appoint an auditor. In accordance with the Accounting Act, the appointment of an auditor is not mandatory if both of the following conditions are met:
- the annual net sales (calculated for the period of one year) did not exceed HUF 200 million on the average of the two financial years preceding the financial year under review (the limit is expected tol increase to HUF 300 million from HUF 200 million in case of financial years starting from 2014)
- the average number of people employed by the undertaking did not exceed 50 people on the average of the two financial years preceding the financial year under review.
The auditor shall be selected by the supreme body of the company. The first auditor must be included in the Memorandum of Association.
The auditing activity has to be carried out in line with Hungarian legal regulations and in accordance with the Hungarian National Auditing Standards effective since 1 January 2011, approved and issued by the Hungarian Chamber of Auditors in harmony with International Standards on Auditing (ISA).
Audits may only be conducted in Hungary by individuals who are current members of the Chamber of Auditors. Audits may also be conducted by audit companies and persons having audit license, but even if an audit company is selected the responsible auditor must also be selected and appointed.
To get more information about how these and other incentives make Hungary a prime investment location, please read the Hungarian Investment Promotion Agency’s Invest in Hungary publication.