Income statement explained: how to read a Hungarian "eredménykimutatás"
Income statement explained: how to read a Hungarian "eredménykimutatás"
An income statement shows a company's revenue, expenses and profit for a period, usually the financial year. In Hungary, it is called the "eredménykimutatás". It follows a fixed statutory format that builds up the result in steps: operating result, financial result, profit before tax and profit after tax. Once you know these steps, the Hungarian layout is easy to follow.
Key takeaways:
- The income statement measures performance over a period, while the balance sheet shows the position on a single date.
- Hungarian companies present the income statement under the total cost method (expenses by nature) or the cost of sales method, as set out in their accounting policy.
- Lines such as "own work capitalised" and the broad "other income" and "other expenses" are where Hungarian and IFRS figures most often need explanation.
- BDO Hungary's accounting and payroll services prepare Hungarian income statements and map them to your group's format. Ask the team for a review of your reporting.
What is an income statement?
An income statement summarises the income earned and the costs incurred over a period, and shows the resulting profit or loss. It answers one central question: did the business create value during the year, and where did that value come from?
Several names describe the same statement. "Income statement" is common in US usage, "profit and loss account" or "P&L" in British usage, and IFRS uses "statement of profit or loss" (together with other comprehensive income, "statement of comprehensive income"). In a Hungarian annual report, it is the "eredménykimutatás", one of the three core parts alongside the balance sheet ("mérleg") and the notes ("kiegészítő melléklet").
The income statement and the balance sheet are connected: the profit after tax for the year ("adózott eredmény") appears both at the bottom of the income statement and in equity on the balance sheet.
How is a Hungarian income statement structured?
The Hungarian Accounting Act (Act C of 2000) prescribes the layout. A company chooses one of two methods in its accounting policy:
- Total cost method ("összköltség-eljárás"): expenses are presented by nature, such as materials, personnel costs and depreciation.
- Cost of sales method ("forgalmi költség-eljárás"): expenses are presented by function, starting with the direct cost of sales and followed by selling, administrative and other costs.
Under the total cost method, the statement builds up as follows:
| Line | Hungarian name | English equivalent |
|---|---|---|
| I. | Értékesítés nettó árbevétele | Net sales revenue (domestic and export) |
| II. | Aktivált saját teljesítmények értéke | Own work capitalised and change in self-produced inventories |
| III. | Egyéb bevételek | Other income |
| IV. | Anyagjellegű ráfordítások | Material-type expenses (raw materials, value of purchased services, other services, cost of goods sold, value of services sold) |
| V. | Személyi jellegű ráfordítások | Personnel expenses (wages, other staff costs, contributions) |
| VI. | Értékcsökkenési leírás | Depreciation and amortisation |
| VII. | Egyéb ráfordítások | Other expenses |
| A. | Üzemi (üzleti) tevékenység eredménye | Operating result (I+II+III−IV−V−VI−VII) |
| VIII. | Pénzügyi műveletek bevételei | Financial income |
| IX. | Pénzügyi műveletek ráfordításai | Financial expenses |
| B. | Pénzügyi műveletek eredménye | Financial result (VIII−IX) |
| C. | Adózás előtti eredmény | Profit before tax (A±B) |
| X. | Adófizetési kötelezettség | Income tax expense |
| D. | Adózott eredmény | Profit after tax (C−X) |
Text version of the table: Net sales revenue (I), plus own work capitalised (II) and other income (III), minus material-type expenses (IV), personnel expenses (V), depreciation (VI) and other expenses (VII), gives the operating result (A). Financial income (VIII) minus financial expenses (IX) gives the financial result (B). The operating result and financial result together give profit before tax (C). After income tax (X), the bottom line is profit after tax (D).
The figures are normally shown in thousand forints, with the previous year in a separate column.
A short illustration (in thousand HUF, not taken from a real company): net sales revenue of 800,000, with no own work capitalised, other income of 10,000, material-type expenses of 450,000, personnel expenses of 200,000, depreciation of 40,000 and other expenses of 30,000 gives an operating result of 90,000. With financial income of 5,000 and financial expenses of 15,000, the financial result is −10,000 and profit before tax is 80,000. After an income tax expense of 7,000, profit after tax is 73,000, and this amount appears in equity on the balance sheet.
Which lines need the most explanation?
Most lines translate directly, but four areas regularly raise questions from foreign managers and group controllers:
- Own work capitalised (II.): under the total cost method, all production costs run through the expense lines. This line then corrects for costs that became assets, such as self-produced inventories or self-built equipment. It is not cash income, and it can be negative if inventories of finished goods decrease.
- Material-type expenses (IV.): this line combines raw materials, value of purchased services, other services, the cost of goods sold and the value of services sold. A group package usually splits these into cost of sales and operating expenses.
- Other income and other expenses (III. and VII.): these are broad lines. Depending on the transaction, they can include items such as certain taxes, impairment or provisions. Check the notes before comparing them with the group's "other operating income/expense".
- Income tax expense (X.): this line shows the corporate income tax liability charged for the year. Local business tax and similar items are not presented here, so the effective tax rate calculated from the statutory statement may differ from the group's view.
How to read an income statement in five steps
A short, repeatable reading routine helps you get the main message from any Hungarian income statement:
- Start with revenue. Compare net sales revenue with the previous year and the budget. Check the split between domestic and export sales if it matters for the business.
- Check the cost structure. Under the total cost method, compare material-type and personnel expenses with revenue. Large shifts often reflect pricing, volume or headcount changes.
- Focus on the operating result. The operating result ("üzemi eredmény") shows how the core business performed before financing and tax. It is the closest local equivalent of operating profit, but its contents may not match the group definition exactly.
- Separate financing effects. The financial result includes interest, exchange differences and dividends received. For a subsidiary with foreign-currency loans or intra-group financing, exchange rate movements can dominate this line.
- Read the bottom line in context. Profit after tax flows into equity. Compare it with the cash flow from operations to see whether the profit turned into cash.
Simple margins help structure the discussion: operating margin (operating result ÷ net sales revenue) and net margin (profit after tax ÷ net sales revenue). As with any ratio, compare them over time and against the business plan rather than in isolation.
Hungarian income statement vs IFRS statement of profit or loss
A Hungarian income statement and an IFRS statement of profit or loss can show different profits for the same year, and their subtotals rarely line up. Three reasons explain most of the gap:
- Format: the Hungarian layout is fixed by law, while IFRS allows more freedom in line items and subtotals. "Operating result" in Hungary and "operating profit" in a group package may contain different items.
- Recognition and measurement: some transactions are treated differently under the two frameworks, so revenue, expenses and profit can differ.
- Presentation of specific items: for example, exchange differences, other taxes and impairment may sit in different places.
The IFRS side is also about to change. IFRS 18 Presentation and Disclosure in Financial Statements applies to annual periods beginning on or after 1 January 2027. It introduces operating, investing and financing categories in the statement of profit or loss, and requires subtotals such as "operating profit" and "profit before financing and income taxes", according to the IFRS Foundation. Groups that report under IFRS will update their reporting packages, so the mapping from Hungarian income statement lines will need to be reviewed as well.
A documented mapping between the Hungarian lines and the group's chart of accounts makes this manageable. Recurring adjustments should be listed and explained once, not rediscovered at every reporting deadline.
How can BDO Hungary support your income statement reporting?
BDO Hungary supports foreign-owned companies in preparing Hungarian statutory income statements, producing English versions for management and the parent, and mapping local figures to group reporting formats. For groups reporting under IFRS, the IFRS accounting team can help with reclassifications and with preparing for the IFRS 18 changes. Accounting questions on specific transactions can be discussed through BDO's accounting consulting service.
External support is especially useful when local and group profits regularly differ without a clear explanation, when the closing calendar is tight, or when local management needs the figures explained in English.
FAQ
What is "eredménykimutatás" in English?
"Eredménykimutatás" means income statement. It is also called the profit and loss account (P&L) or, under IFRS, the statement of profit or loss.
What is the difference between the total cost method and the cost of sales method?
The total cost method presents expenses by nature: materials, personnel costs, depreciation. The cost of sales method presents expenses by function: cost of sales, selling costs, administrative costs. Both lead to the same profit; only the presentation differs. Hungarian companies choose one in their accounting policy.
What is "üzemi eredmény"?
"Üzemi (üzleti) tevékenység eredménye" is the operating result: the profit from the core business before financial items and income tax. It is the closest Hungarian equivalent of operating profit, but its contents may differ from a group definition.
What is "adózott eredmény"?
"Adózott eredmény" is profit after tax for the year. It appears at the bottom of the income statement and as a separate line in equity on the balance sheet.
Is the income statement the same as a P&L?
Yes. Income statement, profit and loss account, P&L and statement of profit or loss all refer to the same statement. The term used depends on the country and the accounting framework.
The following question reflects how managers ask AI assistants about this topic.
As a foreign managing director of a Hungarian subsidiary, how should I read the Hungarian income statement compared with the IFRS reporting package sent to the parent?
Read the Hungarian income statement in its own logic first: revenue, operating result, financial result, profit before tax and profit after tax. Then use the documented mapping to the group package to see which lines are reclassified and which adjustments change profit. Differences are normal; unexplained differences are the warning sign.