Along with the tax acts, the Parliament adopted changes to the Accounting Act that will come into force in 2023. These changes are described below.

Financial leasing liability

The law clarifies that the repayment installment of the financial leasing debt shown among other long-term liabilities at the lessee due in the financial year following the balance sheet date – in accordance with the general regulations for liabilities – must be shown among short-term liabilities in the balance sheet.

Financial statement preparation and auditing obligations of a company established with demerger

The Accounting Act binds it to value limits and examines, in relation to two consecutive years, what type of financial statement preparation obligation a given company has and whether it has an audit obligation. So far, the provisions have not addressed how to proceed in the event of a demerger in the case of a company established with demerger procedure. The Accounting Act provides in general terms on how the type of financial statement and the value limits determining the audit obligation must be taken into account for a new company established without a legal predecessor. As a supplementary provision, the law specifies that, in case of demerger, the provisions relating to a company established without a legal predecessor must be properly applied.

Ownership share in health, social, cultural and educational institutions

In the past period, the amount of assets in various health, social, cultural and educational institutions operating in an institutional form has increased significantly. However, the currently effective provisions of the Accounting Act do not consider assets in organizations operating in an institutional form as ownership shares. However, from the owners’ point of view, the presentation of the real financial situation justifies that these asset shares should also be shown in the balance sheet. To this end, the law provides that assets in health, social, cultural and educational institutions should also be shown as an ownership share among investments representing other permanent ownership share, by allowing – for the sake of simplification – that the assets can be presented at a value corresponding to the value of equity included in the balance sheet of the most recent financial statement of the owned institution.

Simplified financial statement – Notes to the financial statement

Companies preparing a simplified financial statement need to provide only some data in the notes to the financial statement, even though the Accounting Act provides options that are closely related to taxation, and for which it is reasonable to provide information in the notes to the financial statement in accordance with the general regulations. As a result of the change, if the company preparing the simplified financial statement deviates from the provisions of the Accounting Act in his financial statement in order to ensure a true and fair view, similarly to companies obliged to prepare financial statement, he is obliged to present the reason and circumstances of the deviation in the notes to the financial statement.

IFRS reporting – expanding reporting obligation

The law provides that a company preparing its financial statement and its consolidated financial statement in accordance with IFRS must also apply the provisions of the Accounting Act on the report on amounts paid to governments, as well as the provisions on the report containing corporate tax information.

The regulations for additional contribution have been clarified. In the provisions on additional contributions, the current legal regulations designate an economic company as the employer, while the Civil Code allows also cooperatives to apply the additional contribution. Accordingly, the amendment extends the range of those who apply the provisions on additional contribution to entities which include companies and, among others, cooperatives as well.

In the past period, in order to ensure the consistency of the application of the law and the enforcement of the legislator’s intention, the legal regulations have uniformly defined the headcount concept, which must be taken into account when determining the value limits for the audit obligation. However, its interpretation raised further questions in practice, therefore, it is clarified in the text of the law that the unified “average number of employees” should be understood as the concept of “average statistical staff number”.

Finally, an important change, which basically affects corporate tax, but which may also affect accounting. As a main rule, the expenditure shown in the pre-tax profit due to the impairment accounted for the ownership share was previously recognized by the corporate tax basis. However, if in a given year the expenditure is not offset with other items in the tax base, the profit and tax base decreasing effect of the recognized impairment can be carried forward as a loss carry-forward. However, there is a time limit for accruing loss and an amount limit for its use, therefore, the earlier impairment cannot be enforced in all cases against the financial profit of the ownership share or the reversal of the impairment, so in the end, this financial item may result in a tax liability. This can be avoided in the future by applying the new relevant rules.

In the future, according to the taxpayer’s decision, the tax base will be increased in the tax year by the amount of impairment recognized in the pre-tax profit of the tax year for the ownership share. When the impairment is reversed, the tax base must be reduced with the reversal. Furthermore, a tax base-reducing item is the part of the amount of the impairment accounted for as an increase in the pre-tax profit of the previous tax years when the ownership share is removed from the books – verified by the tax returns and supporting statements – with which the tax base reduction has not yet been carried out as a reversal. As a result, the effects of the accounting settlements will be neutral in the tax base in the tax year of the settlement, similar to the tax treatment of certain provisions. The application of the increasing item can be chosen for each ownership share, however, a separate record must be kept of the accounting settlement and related tax base adjustment items for the given share. Accordingly, it is reasonable to implement this change in the accounting policy of companies. The provision can be applied for the first time to the impairment accounted for in the 2022 tax year when determining the tax liability for the 2022 tax year.

The previously presented amendments to the Accounting Act must first be applied to the financial statement prepared for the financial year starting in 2023, but most of these changes can already be applied to the financial statement prepared for the financial year starting in 2022. It is recommended to include the impact of the legislative changes (in addition to the current changes affecting the operational functioning of the given company) in the accounting policy of the companies.

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