An important deadline is approaching: during the year-end closing, businesses must complete a number of accounting and administrative tasks in order to prepare accurate and compliant financial statements. The preparation of inventories, the completion of valuation processes, the verification of cash registers and the review of equity are all key steps. In addition, updating internal policies and ensuring compliance with new tax regulations also require special attention.

Preparation of year-end inventories and settlement of inventory differences

For closing the books at the end of the financial year, preparing the financial statements and supporting balance sheet items, an inventory must be prepared that contains the assets and liabilities existing on the balance sheet date in a detailed and verifiable manner, both in quantity and value.

If continuous quantity records are maintained, it is sufficient to verify the accuracy of the assets included in the inventory through physical stocktaking every three years. If such records are not maintained, stocktaking must be performed annually.

Any quantity differences identified during stocktaking (shortages or surpluses) must be accounted for as other expenses or other income. In addition, items to be scrapped must be reviewed and removed from the books in accordance with applicable regulations.

Performing balance sheet date valuations

Updating the valuation of assets and liabilities included in the balance sheet involves the following main steps:

• Recognition of impairment above planned depreciation: for intangible assets and tangible assets where the book value is permanently and significantly higher than the market value.
• Recognition of impairment: for investments representing ownership interests, long-term securities, inventories and financially unsettled receivables where the market value has permanently decreased.
• Possibility of revaluation: if the market value of assets significantly exceeds their book value, the entity may decide to apply revaluation.
• Updating foreign exchange rates: revaluation of foreign currency and foreign exchange assets and liabilities using the exchange rate on the balance sheet date.

Year-end closing of cash registers

The actual existence of the cash balance recorded in the cash register must be verified through stocktaking. The tax authority closely monitors the recording of cash movements, therefore special attention must be paid to the management of cash balances in order to avoid excessive cash holdings.

Year-end reconciliations and checks

• Reconciliation of the general ledger accounting with analytical records.
• Review of the tax account and reconciliation with accounting records.
• Timely settlement of tax advances and tax liabilities.

Provisioning

• Mandatory provisions must be recognised for statutory obligations (e.g. guarantees or litigation).
• Provisions may also be created for significant future costs that recur periodically.
• Provisions may be recognised to cover deferred foreign exchange losses.

Creation of restricted reserves

Restrictions from retained earnings must be made for development purposes or other purposes required by law.

Accruals and deferrals

Income and expenses must be allocated to the appropriate period, with particular attention to items affecting multiple financial years.

Going concern principle

When preparing the financial statements, the ability of the company to continue its operations must be assessed and any related risks must be documented.

Examination of equity

The necessary steps must be determined to ensure that equity remains above the statutory minimum level (e.g. capital contribution, capital restructuring or capital reduction).

• Updating policies and documentation
• Updating the accounting policy, inventory policy, valuation policy and other internal regulations.
• Preparation and updating of transfer pricing documentation.
• Verification of Country-by-Country (CbC) reporting obligations (above the EUR 750 million revenue threshold).
• Application of the global minimum tax: from 2024, multinational enterprise groups must ensure an effective corporate tax rate of at least 15%. Under Hungarian legislation, affected companies must calculate their effective tax rate and, if it is below 15%, additional tax liabilities may arise. It is advisable to seek tax advisory support to clarify administrative obligations and tax burdens.

It is advisable to start completing year-end tasks in time in order to make well-informed decisions about the future of the company.