Hungary’s decision on IFRS based statutory reporting is great news for companies

Following a Hungarian government decision on 12 June 2015, Hungarian companies will be able to prepare separate financial statements in accordance with IFRS.

The change will take effect from the 2016 financial year and will see companies that are publicly listed in any of the EEA countries, or those with an ultimate parent company that issues IFRS financial statements, able to replace their statutory (Hungarian GAAP) financial statements.

The decision is warmly welcomed by the applicable companies, as the biggest ones do generally keep their books in accordance with IFRS and then convert them to HU GAAP in order to comply with local rules.

Companies were forced to carry out parallel accounting which is a heavy administrative burden, inconvenient and of course, costly.

Entities liable for statutory audit for any reason will be able to opt for preparation of IFRS financial statements from the 2017 financial year, while as of 2017, publicly listed companies will be obligated to issue only IFRS-based separate financial statements.

The Hungarian government’s revolutionary decision is quite timely if not unavoidable when you consider that several countries in the region have already made this allowance.

Hungary’s later introduction is likely due to the specific modifications in tax and other legislation that are required in order for the change to actually work for companies that do opt to cease parallel accounting in favour of IFRS based financial statements.

From a business perspective, IFRS reporting will give investors better comparisons and judgements through transparent, international and well-known principles that may boost competitive edge.

Got any questions? Get in touch with our expert team in Hungary.

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