Critical points of Hungarian companies transition to IFRS

Abstract

One of the main aspirations in the field of accounting today is making reporting rules internationally recognized, unifying the accounting rules and eliminating the differences between the financial statements in individual countries, thereby strengthening the confidence of investors and ensuring that the financial reports provide comparable, reliable and transparent information. One key element of improving competitiveness and ensuring a long-term sustainable operation for businesses may be the application of international standards and the transition to accounting according to IFRS. In Hungary, the Accounting Act makes it mandatory for some groups of companies, while allowing others to prepare financial statements in accordance with International Financial Reporting Standards. Therefore, as a result of the accelerating globalization, the question whether it is really worthwhile to restructure their accounting records according to the international accounting standards has been raised in several Hungarian corporate executives as well. Thus, nowadays the introduction of the IFRS and their practical usage pose a serious challenge for Hungarian entrepreneurs. From a business perspective, it is an important decision that in addition to its several benefits and besides the plenty of changes as well as the additional costs, the benefits of transition can outweigh the expenditure. The aim of our study is to present and explore the advantages and disadvantages of the transition to the International Financial Reporting Standards as well as the most significant accounting and organizational changes of the transition and to identify the critical points. In the course of our work, we are describing the steps of the introduction of IFRS, the surveys published so far and their experiences. We are comparing the requirements concerning the preparation of financial statements of the Hungarian Accounting Act as well as the International Financial Reporting Standards, and we are describing the new disclosures according to the IFRS system. The result of our research means on the one hand, a summary of the similarities and differences between the two accounting systems on the other hand, it involves exploring the benefits and drawbacks of the transition to the International Financial Reporting Standards for accounting professionals with appropriate information background.