The financial statements are often called annual reports in the business language. The accountants, however, prefer the name financial statements (FS). They include a lot of crucial information for the owners and the management, hence it is important to know how to read them. The normal deadline to approve and publish these reports in 31 May. We are the reporting season now, this is why we summarise the basic information about them.
How does it work in Hungary?
Most of the companies prepare simplified financial statements, which consists of the following elements:
profit and loss statement
- balance sheet
- additional notes
Profit and loss statement
The P&L shows all the revenues, costs and expenses of the company occurred in a given period, usually a business year, in thousand HUF (eFt). The bottom line of the P&L is the net profit or loss achieved in the referring period.
The BS lists the properties of the company and their sources at a given date, usually at the end of a business year. It has two sides or parts that must match: assets are on one side, while the equity and liabilities on the other side. The equity section includes the net profit or loss achieved according to the P&L as described above.
The accounting act defines what additional data must be published about the operation of the company beside the BS and P&L. The additional notes is a list of details of the data presented in the reports, statistical data and some minor information, such as the number of employees, payments to the management, etc.
Bigger companies, where the simplified annual report is not enough, a business report is also necessary. This is basically about the operation of the company, such as employment policy, R&D, potential developments, environment protection, risk management etc.
If an audit of the financial statements is requested, the report of the auditors must also be published, together with the statements.
The package of the financial statements is approved - or rejected - by the owners. This can be the general assembly or the single owner, depending on the ownership structure. They also have to decide about what to do with the profit: to pay dividend or to put it to the reserve. These resolutions are also to be published.
What to do with them?
The official financial statements are in Hungarian, but we always prepare them in English as well, except the additional notes. The FS should be signed and kept by the company. We upload the data of the P&L and BS with the pdf files of the other reports to the Ministry of Justice.