The obligation for companies to prepare annual reports has become a routine task for Hungarian companies – speaking of a mature economy from time to time. However, if companies do not comply with this obligation, they will have to face serious legal consequences.
Preparation and acceptance of annual reports
Every company using double-entry bookkeeping is obliged to prepare annual reports; the report is prepared for the business year on the last day of the business year as the balance sheet date. The annual report must show a reliable and true picture of the company’s financial, financial and income position and changes in them. It includes the company’s assets, equity, provisions and all liabilities (taking into account deferred income items); in addition, the income and expenses of the period covered by the report, the after-tax profit, and the data and textual explanations that are necessary to present the entrepreneur’s real financial position and operating results. The annual report consists of a balance sheet, a profit and loss account and supplementary notes. The annual report is adopted by a resolution of the business association. The structural and content elements of the annual report are contained in Annexes 1-3 to Act C of 2000 on Accounting.
Simplified annual report
A business association that maintains double-entry bookkeeping may prepare a simplified annual report if, on the balance sheet date for two consecutive business years, any two of the following three indicator values indicating the size do not exceed the following: the balance sheet total is 1.2 billion forints, and/or the annual net sales are 2.4 billion forints, and/or the average number of employees in the business year is 50 people. The possibility of preparing a simplified annual report is excluded, for example, from a publicly traded limited liability company or its parent company. The simplified annual report consists of a balance sheet, income statement and supplementary notes; a business report does not need to be prepared for it.
Publication
Business companies that maintain double-entry bookkeeping can publish their reports via the OBR online interface administered by the Ministry of Justice. The publication obligation and deadline were prescribed by the legislator in the Accounting Act. Since the spring of 2018, the report can be published if the company also has company portal authorization. In practice, this usually happens when the authorized person with EGYKE authorization, usually for practical reasons, the accountant, and the clients belonging to them submit their reports via their own client portal.
However, the OBR system is not only automatically connected to the KAÜ system, but also – which helps speed up the legal consequences in the event of a default – with the court of registration. In the event of failure to comply with the obligation to publish the report, the business company may not only face a fine from the Hungarian Tax and Customs Administration, but based on the automatic notification, the competent court of registration may even order its forced cancellation within the framework of a legality supervision procedure.