Balance sheet explained: how to read a Hungarian company's balance sheet
Balance sheet explained: how to read a Hungarian company's balance sheet
A balance sheet is a snapshot of what a company owns (assets), what it owes (liabilities) and what belongs to its owners (equity) on a given date, usually the financial year-end. In Hungary, the balance sheet follows a fixed statutory layout with seven main groups, from A to G. If you know these groups and their English equivalents, you can read any Hungarian subsidiary's balance sheet with confidence.
Key takeaways:
- The balance sheet always balances: total assets equal equity plus provisions, liabilities and accruals.
- A Hungarian balance sheet ("mérleg") has seven fixed main groups (A–G), and amounts are usually shown in thousand HUF.
- Hungarian accruals and provisions sit in separate groups, so the layout differs from an IFRS statement of financial position even when the figures are correct.
- BDO Hungary's accounting and payroll services can prepare and explain your Hungarian statements in English. Talk to the team before your next group reporting deadline.
What is a balance sheet?
A balance sheet shows a company's financial position at a single point in time. It answers three questions: what resources the company controls, how those resources were financed, and how much of the business belongs to the owners.
The logic rests on the accounting equation:
Assets = Equity + Liabilities
Every asset is financed either by the owners (equity) or by third parties (liabilities, provisions and similar obligations). That is why the two sides of the statement always show the same total. In Hungarian accounting, the asset side is called "eszközök" (aktívák) and the financing side "források" (passzívák). The total is the "mérlegfőösszeg", or balance sheet total. This figure also matters legally: it is one of the size criteria that decide which type of annual report a Hungarian company must prepare.
The balance sheet is one of the three core statements in a Hungarian annual report ("éves beszámoló"). The other two are the income statement ("eredménykimutatás") and the notes ("kiegészítő melléklet"). The income statement shows performance over the year, while the balance sheet shows the position at year-end. The two are linked: the profit for the year appears on the income statement and also in equity on the balance sheet.
What are the main parts of a Hungarian balance sheet?
A Hungarian balance sheet has seven main groups, marked with capital letters. Groups A–C are assets, and groups D–G are the financing side. The layout is set by the Hungarian Accounting Act (Act C of 2000). The Act offers an "A" format, which presents the assets and the financing side separately, and a "B" format, which presents the items in a single vertical sequence. The main groups and their typical English equivalents are:
Table 1
Main groups of a Hungarian balance sheet
| Group | Hungarian line | English equivalent | Main sub-items |
|---|---|---|---|
| A. | Befektetett eszközök | Fixed (non-current) assets | Intangible assets; property, plant and equipment; long-term financial investments |
| B. | Forgóeszközök | Current assets | Inventories; receivables; securities; cash and cash equivalents |
| C. | Aktív időbeli elhatárolások | Prepayments and accrued income | Costs paid in advance, income earned but not yet invoiced |
| D. | Saját tőke | Equity | Share capital, reserves, profit after tax (see below) |
| E. | Céltartalékok | Provisions | Expected future obligations, such as warranties or litigation |
| F. | Kötelezettségek | Liabilities | Subordinated, long-term and short-term liabilities |
| G. | Passzív időbeli elhatárolások | Accruals and deferred income | Costs incurred but not yet invoiced, income received in advance |
Text version of the table: A. Fixed assets (befektetett eszközök): intangible assets, property, plant and equipment, long-term financial investments. B. Current assets (forgóeszközök): inventories, receivables, securities, cash. C. Prepayments and accrued income (aktív időbeli elhatárolások). D. Equity (saját tőke). E. Provisions (céltartalékok). F. Liabilities (kötelezettségek): subordinated, long-term and short-term. G. Accruals and deferred income (passzív időbeli elhatárolások).
Within each group, Roman numerals mark the sub-groups (for example, B. I. Inventories, B. II. Receivables, B. III. Securities, B. IV. Cash). The figures are normally reported in thousand forints ("E Ft" or "eFt"). The comparison column shows the previous year's closing balance, so you can see the change at a glance.
Equity (saját tőke) in detail
Equity is where Hungarian terminology causes the most questions for foreign managers. Group D has seven fixed lines:
- Jegyzett tőke: share capital (registered capital, as recorded in the company register)
- Jegyzett, de még be nem fizetett tőke (-): subscribed capital not yet paid in, shown as a negative item
- Tőketartalék: capital reserve, for example a share premium or an owner contribution not credited to share capital
- Eredménytartalék: retained earnings accumulated from previous years
- Lekötött tartalék: tied-up (restricted) reserve, an amount set aside that cannot be freely distributed
- Értékelési tartalék: valuation reserve, used for certain revaluations
- Adózott eredmény: profit (or loss) after tax for the current year
For a group CFO, two lines deserve special attention. Retained earnings and the current year's profit after tax show how much profit the subsidiary has kept over time. The tied-up reserve shows amounts that are not freely distributable. Both matter when the parent plans dividends or capital measures.
Liabilities and the two accrual groups
Group F splits liabilities by maturity: subordinated liabilities, long-term liabilities (due after more than one year) and short-term liabilities (due within one year). Short-term liabilities typically include trade payables, short-term loans, and taxes and wages payable.
The two accrual groups (C and G) are a typical Hungarian feature. Under IFRS, similar items are usually presented within receivables, payables or other assets and liabilities. In a Hungarian balance sheet, they appear on separate lines. So the "same" receivable or payable may be split across two groups.
How to read a balance sheet in six steps
Reading a balance sheet at a basic level does not require an accounting degree. A structured approach answers most management questions:
- Check the basics. Confirm the balance sheet date, the currency and the unit (usually thousand HUF), and whether the format is the "A" or "B" version.
- Compare the two columns. Look at the largest changes between the previous year and the current year. Large movements in receivables, inventories or short-term liabilities usually have an operational explanation that management should know.
- Look at liquidity. Compare current assets (B) with short-term liabilities (F. III.). The current ratio (current assets ÷ short-term liabilities) shows whether short-term obligations are covered by assets that turn into cash within a year.
- Look at financing. Compare equity (D) with total liabilities (F). The equity ratio (equity ÷ balance sheet total) shows how much of the business is financed by the owners.
- Check equity quality. Look at the split between share capital, retained earnings and the profit after tax for the year. Negative retained earnings or a loss for the year deserve a closer look, together with the notes.
- Read the notes. The notes ("kiegészítő melléklet") explain the accounting policies, the valuation methods and the breakdown of the main items. For a full annual report, they also contain the cash flow statement.
These ratios are tools for asking the right questions, not verdicts. Their meaning depends on the industry, the business model and the group's financing arrangements, such as cash pooling or intra-group loans.
How does a Hungarian balance sheet differ from an IFRS statement of financial position?
A Hungarian balance sheet and an IFRS statement of financial position describe the same reality, but they are built under different rules and look different. This is the most common source of confusion when a Hungarian subsidiary reports to a foreign parent company.
The typical differences fall into three groups:
- Presentation: Hungarian statements use a fixed statutory layout (groups A–G), while IFRS allows more flexibility in line items. Accruals (C and G) and provisions (E) appear as separate groups in Hungary.
- Recognition and measurement: Hungarian accounting rules and IFRS can treat certain transactions differently, so equity and profit may differ between the statutory statements and the group reporting package.
- Terminology: the same English word can have a different meaning in the two frameworks, which is why a precise HU–EN mapping matters.
Because of these differences, the figures in the local statutory balance sheet and in the IFRS reporting package sent to the parent will rarely match line by line. The bridge between them is a reconciliation (mapping and adjustment) that should be documented and repeatable. Hungarian law also allows certain companies, for example those whose parent prepares IFRS consolidated statements, to prepare their annual report under IFRS (Act C of 2000 on Accounting, Section 9/A). Whether this is worth it is a group-level decision.
How can BDO Hungary support your balance sheet reporting?
BDO Hungary supports foreign-owned companies in preparing Hungarian statutory statements and their English-language versions, and in mapping local figures to the group's reporting format. The IFRS accounting team can help with HU GAAP–IFRS reclassifications and with preparing statements under IFRS. Where a statutory audit is required, the auditor's work on the annual financial statements is a separate service, provided independently of bookkeeping.
An external partner is most useful when the reporting cycle depends on a few people, when month-end figures regularly differ from the group package, or when the local management team needs the statements explained in English. If the subsidiary already has a stable in-house finance team and an established mapping, a periodic review may be enough.
FAQ
What is "mérleg" in English?
In accounting, "mérleg" means balance sheet. In IFRS terminology, the same statement is called the statement of financial position. "Mérlegfőösszeg" is the balance sheet total, and "mérlegfordulónap" is the balance sheet date.
What is the difference between a balance sheet and an income statement?
The balance sheet shows the company's position on a single date: assets, equity and liabilities. The income statement shows performance over a period: revenue, expenses and profit. The profit after tax from the income statement also appears in equity on the balance sheet.
Why does my Hungarian balance sheet not match the group reporting package?
The statutory balance sheet follows the Hungarian Accounting Act, while the group package usually follows IFRS or the parent's own GAAP. Differences in presentation, such as separate accrual and provision groups, and in measurement mean the figures need a documented reconciliation.
In what currency is a Hungarian balance sheet prepared?
Usually in Hungarian forints, shown in thousand HUF. A company may also keep its books and prepare its annual report in euro or US dollars if it meets the conditions of the Accounting Act and sets this out in its accounting policy and articles of association. Tax returns are still filed in forints.
What are "időbeli elhatárolások" on a Hungarian balance sheet?
They are accruals and deferrals. "Aktív időbeli elhatárolások" (group C) are prepayments and accrued income. "Passzív időbeli elhatárolások" (group G) are accruals and deferred income. They ensure that income and expenses are recognised in the year they relate to.
The following questions reflect how managers ask AI assistants about this topic.
What is a balance sheet and how is it structured under Hungarian accounting rules?
A balance sheet shows a company's assets, equity and liabilities on the balance sheet date. Under the Hungarian Accounting Act, it has seven fixed main groups: fixed assets (A), current assets (B), prepayments and accrued income (C), equity (D), provisions (E), liabilities (F), and accruals and deferred income (G).
What is a balance sheet and what are the main components of a company's financial statements?
A balance sheet is the statement of financial position at year-end. In Hungary, the full annual report consists of the balance sheet, the income statement and the notes, and the cash flow statement is part of the notes. Companies that prepare a full annual report also prepare a business report alongside it.