Cash flow statement explained: what Hungarian companies prepare and how to read it
Cash flow statement explained: what Hungarian companies prepare and how to read it
A cash flow statement shows how cash moved through a business during a period, split into operating, investing and financing activities. In Hungary, the cash flow statement ("cash flow-kimutatás") is part of the notes in the full annual report, and companies preparing a simplified annual report do not have to include it. It is the statement that shows whether profit actually turned into cash.
Key takeaways
- Profit and cash are not the same: the cash flow statement explains the difference between them.
- The Hungarian cash flow statement has three main sections (operating, investing and financing) and starts from profit before tax.
- It is required in the notes of the full annual report, not in the simplified or micro-entity formats.
- BDO Hungary's accounting and payroll services prepare Hungarian statutory statements, including the cash flow statement, and explain them in English. Contact the team for support.
What is a cash flow statement?
A cash flow statement reconciles the opening and closing cash balance for a period. It shows where cash came from and where it went, grouped by type of activity:
- Operating activities: cash generated or used by the core business, such as collections from customers and payments to suppliers and employees.
- Investing activities: cash spent on or received from long-term assets, such as equipment, property or financial investments.
- Financing activities: cash received from or paid to owners and lenders, such as loans, repayments, capital contributions and dividends.
The statement complements the balance sheet and the income statement. The income statement records revenue and expenses when they are earned or incurred, not when cash changes hands. A sale on credit increases profit immediately, but cash arrives only when the customer pays. The cash flow statement closes this gap.
When must a Hungarian company prepare a cash flow statement?
Under the Hungarian Accounting Act (Act C of 2000), the cash flow statement is part of the notes ("kiegészítő melléklet") in the full annual report ("éves beszámoló"). Companies that prepare a simplified annual report ("egyszerűsített éves beszámoló") or a micro-entity report do not have to include one.
Whether a company prepares the full or the simplified format depends on its size and status. In 2026, the simplified format is available if at least two of three limits are not exceeded in two consecutive years: a balance sheet total of HUF 2 billion, net revenue of HUF 4 billion and an average of 50 employees. Public limited companies, parent companies, public-interest entities and listed companies cannot use it.
Many groups still need a cash flow view for a subsidiary that does not prepare one locally, because the parent's consolidated statements include a group cash flow statement. In that case, the subsidiary's cash flow figures are usually prepared for the reporting package rather than for the Hungarian filing.
How is the Hungarian cash flow statement structured?
The Hungarian cash flow statement uses the indirect method: it starts from profit before tax and adjusts it for non-cash items and changes in working capital. The main sections are:
| Section | Hungarian name | English equivalent | Typical items |
|---|---|---|---|
| I. | Szokásos tevékenységből származó pénzeszköz-változás | Cash flow from operating activities | Profit before tax, depreciation, impairment, changes in provisions, inventories, receivables and payables, tax paid |
| II. | Befektetési tevékenységből származó pénzeszköz-változás | Cash flow from investing activities | Purchase and sale of fixed assets, including long-term financial investments |
| III. | Pénzügyi műveletekből származó pénzeszköz-változás | Cash flow from financing activities | Capital increases, loans taken and repaid, dividends paid |
| IV. | Pénzeszközök változása | Net change in cash | Sum of I, II and III |
Text version of the table: Section I (szokásos tevékenységből származó pénzeszköz-változás) is the operating cash flow, starting from profit before tax and adjusted for depreciation, impairment, provisions, working capital changes and tax paid. Section II (befektetési tevékenységből származó pénzeszköz-változás) is investing cash flow: purchase and sale of fixed assets. Section III (pénzügyi műveletekből származó pénzeszköz-változás) is financing cash flow: capital, loans and dividends. Section IV (pénzeszközök változása) is the net change in cash.
The net change in cash (IV.) should equal the difference between the opening and closing cash ("pénzeszközök") on the balance sheet. This is the first consistency check worth doing.
A simple example: why profit and cash differ
The following illustrative figures (in thousand HUF, not taken from a real company) show how a profitable year can still end with less cash:
- Profit before tax: 50,000
- Plus depreciation (a non-cash expense): +20,000
- Increase in trade receivables (customers have not paid yet): −45,000
- Increase in inventories: −15,000
- Increase in trade payables (suppliers not yet paid): +10,000
- Income tax paid: −5,000
- Operating cash flow: +15,000
- Purchase of equipment: −30,000
- Investing cash flow: −30,000
- Loan repayment: −10,000
- Financing cash flow: −10,000
- Net change in cash: −25,000
The company reported 50,000 of profit before tax, yet its cash fell by 25,000. The main reasons are visible at a glance: customers are paying more slowly, stock has grown, and the company invested in equipment and repaid debt. Without the cash flow statement, this story would stay hidden behind a healthy profit figure.
How to read a cash flow statement in five steps
A cash flow statement is easiest to read from the top down, with a few questions in mind:
- Compare operating cash flow with profit. If operating cash flow is consistently lower than profit, the business may be tying up cash in receivables or inventory. If it is higher, the company may be collecting faster than it pays, or the profit may be reduced by non-cash items such as depreciation.
- Look at working capital movements. Increases in receivables and inventories consume cash; increases in payables release it. Ask what drove the change: growth, longer customer payment terms or a one-off effect.
- Check investing activity. Regular purchases of fixed assets show that the company is maintaining or expanding its capacity. Sales of fixed assets bring in cash once, but they do not repeat.
- Read the financing section. Loans taken, loans repaid, capital contributions and dividends show how the owners and lenders are funding the business, or how much cash is going back to them.
- Reconcile with the balance sheet. The net change in cash should match the movement of the cash line between the two balance sheet dates.
A useful summary measure is free cash flow: operating cash flow minus capital expenditure. It shows how much cash the business generates after maintaining its asset base.
Hungarian cash flow statement vs IFRS (IAS 7)
The international standard for cash flow statements is IAS 7 Statement of Cash Flows, which also uses operating, investing and financing activities. The basic logic is the same in both frameworks, but the details differ, so a Hungarian cash flow statement and the cash flow in a group package rarely match line by line.
Typical sources of difference are:
- Starting point and adjustments: the Hungarian statement starts from profit before tax, and profit itself may differ between Hungarian rules and IFRS.
- Classification: IAS 7 sets its own rules on where items such as interest and dividends are presented, which may differ from the Hungarian layout.
- Scope of "cash": what counts as cash and cash equivalents, and how items such as cash pool balances are treated, can differ between the frameworks and group policies.
Because the group cash flow is often derived from balance sheet movements, clean and consistent balance sheet mapping is the best foundation for a reliable cash flow figure in the reporting package. The IFRS changes introduced by IFRS 18, which applies from 1 January 2027, also affect presentation in the group statements, so the mapping should be reviewed when the group moves to the new standard.
How can BDO Hungary support your cash flow reporting?
BDO Hungary supports foreign-owned companies in preparing the Hungarian annual report, including the cash flow statement in the notes, and in producing the cash flow information needed for group reporting packages. The comprehensive accounting services cover the statutory side. The IFRS accounting team can help where the group needs IFRS-based cash flow figures or reconciliations.
External support is most helpful when the subsidiary does not prepare a cash flow statement locally but the group still needs one, or when local and group cash figures regularly need manual correction.
FAQ
What is "cash flow-kimutatás" in English?
It is the cash flow statement, also called the statement of cash flows. In a Hungarian full annual report, it is part of the notes ("kiegészítő melléklet").
Do all Hungarian companies have to prepare a cash flow statement?
No. The cash flow statement is required in the full annual report. Companies preparing a simplified annual report or a micro-entity report are not required to include it.
Why can a profitable company run out of cash?
Profit is recognised when income is earned, not when cash is received. A growing company that sells on credit, builds up inventory or invests heavily can report profit while its cash decreases. The cash flow statement shows exactly where the cash went.
What is the difference between the direct and the indirect method?
The direct method lists actual cash receipts and payments, such as collections from customers. The indirect method starts from profit and adjusts it for non-cash items and working capital changes. The Hungarian cash flow statement uses the indirect approach, starting from profit before tax.
What does "szokásos tevékenységből származó pénzeszköz-változás" mean?
It means cash flow from operating activities: the cash generated or used by the company's core business during the year.