16.11.2017

Year-end stock-taking tasks loom closer

Companies operating according to a normal financial year will soon reach the end of their year. In preparation for their annual reporting, these firms have to take certain steps in terms of stock taking.

Traditionally, this means the recording of assets in an inventory, but it is important to note that equity and liability elements in the annual report also have to be supported by an inventory. The Act on Accounting defines the principles and obligations related to stock-taking. In addition to other policies, the stock-taking and inventory policy has to be prepared for assets and equity and liabilities when compiling the accounting policies. This includes the assets and liabilities to be included in the stock-take, the counting and evaluation methods, the documentation system and schedule along with the persons in charge of it.

Stock-taking rules according to the Act on Accounting

Section 69 of the Act on Accounting states that an inventory has to be compiled and kept for the year-end accounting closure, the preparation of the annual report and to substantiate balance-sheet items, which includes the assets, equity and liabilities of the company as of the balance sheet date, in terms of both quantity and value, item by item, in a verifiable manner. Sub-ledgers have to be reconciled with the bookkeeping data in the general ledger, and the reasons for any deviations have to be justified and managed from an accounting point of view.

The aforementioned section of the Act on Accounting also formulates provisions (Section 69 (3) and (4)) regarding the stock-taking tasks in terms of whether the company keeps quantity records of assets, equity and liabilities on a continuous basis. If not, the authenticity of the data added to the inventory as of the balance sheet date must be verified, since no information is available at all on quantities during the year.

If quantity records are kept continuously, the authenticity of the data has to be supported in the stock-taking and inventory policy for assets, equity and liabilities via a quantity count at specified intervals, but at least every three years. In this case the quantity records are available, so the law permits mandatory reconciliation on a less frequent basis.

End of second 3-year period: 31 December 2017

The statutory change defining the three-year period entered into force on 1 January 2012, so the first 3-year period expired on 31 December 2014. The last day of the second period will be 31 December 2017. Thus companies which prepare their inventory according to the statutory schedule will soon have to carry out stock-taking tasks again. Although this provision may well apply to assets, equity and liabilities whose quantities are continually recorded in practice, it still affects tangible assets the most.

For stock-taking to be as quick as possible, it is best to take advantage of the opportunities offered by modern technology. Bar code-based records are becoming more and more widespread, and if appropriate software is used, they automatically allocate quantities to the tangible asset records that underlie the general ledger bookkeeping. Appropriate preparations are required for this of course, but the invested time and energy will yield multiple benefits later on through the automation of the stock-taking process.

Contact us!

Do you have any questions about WTS Klient Hungary or about our contents? Please let us know by filling in our short contact form. We will get in touch with you as soon as possible.