In the third issue of this year's newsletter, we review the amendments to Act C of 2000 on Accounting (hereinafter: “Act on Accounting”) promulgated on 19 June 2017.
Amendments effective for financial years starting in 2018, but may also be applied to financial years starting in 2017
Findings of tax authority inspections
If the findings of a tax authority inspection were accounted for in a previous financial year or years, but were modified in a legally-binding manner in the current financial year or by no later than the balance sheet preparation date as a subsequent event, then its impact has to be accounted for in the current financial year, and not as a modification of a prior period or periods. [Section 19 (3a) of the Act on Accounting]
Based on the reasoning of this amendment to the Act on Accounting, it does not apply to cases when the tax authority’s final resolution as well as the modification thereof are accounted for in the same financial year, since in such cases the accounting of the final tax authority resolution has to be modified.
From 1 January 2017, the Act on Accounting requires the repayable amount of grant received in a previous financial year or years and accounted for as income to be recognised as other expenses. One related clarification is that deferred income recognised due to a grant related to assets has to be reversed at the same time as the recognition of the repayable grant as an expense, not upon its repayment. [Section 45 (2) of the Act on Accounting]
Accounting for derivative transactions fulfilled via physical delivery
One change is that assets acquired through a derivative transaction via physical delivery have to be revalued to fair value as of the date of acquisition against other income from and expenses on financial transactions, regardless of whether or not they are financial assets, and whether or not fair value measurement is applied. [Sections 47 (12), 59/B. (14), (15) of the Act on Accounting]
The Act on Accounting currently does not include similar requirements for sales under derivative transactions via physical delivery.
Amendment to the Act on Accounting relating to the first-time application of IFRSs adopted by the EU
Cooperative credit institutions and other credit institutions participating in the integration of cooperative credit institutions have received a one-year postponement, so they are only required to prepare their separate annual financial statements under IFRSs as adopted by the EU from financial years starting in 2019.
Some final words
The information provided in this text does not depict the changes and laws in full, and knowledge of the legal regulations is required to fully understand them. Should you have any questions relating to the content of the newsletter, please contact your tax or accounting adviser, or get in touch with us.