Accounting in a foreign currency can bring numerous benefits for companies that carry out the majority of their transactions in a given foreign currency.
- It can help make results predictable.
- It protects against fluctuations in the forint exchange rate.
- It helps to avoid the unpredictable and unforeseeable impacts on profit/loss of unrealised exchange differences.
- It significantly reduces the corporate tax payable on unrealised exchange gains.
Summing these advantages up, accounting in a foreign currency is an effective tool for minimising currency risk in the books.
What does support with changing to a foreign currency actually mean for you?
With our service we weigh up whether it is in fact worthwhile for a company to switch to accounting in a foreign currency. To illustrate this, we model just how the company’s financial statements would look in the given currency, and roughly what size of exchange difference would have arisen had the transition taken place on the first day of the financial year. Based on the model, we jointly analyse with those involved in the decision whether switching makes economic sense. We detail the advantages that a transition may bring, but we also draw attention to the pitfalls and the difficulties of making the switch, so the company can prepare for these in good time after the decision is made.
During the support with changing to a foreign currency we help plan the transition process once the green light is given. Changing to accounting in a foreign currency is a complex process that involves accounting, tax, legal and IT challenges. A successful transition is the result of several months of thorough preparations.
We look ahead to what company law steps will be required during the change. The share capital has to be recorded in the articles of association in the new currency. It is worthwhile revising all customer and supplier contracts so that transactions are largely settled in the currency of the accounts.
Together with the IT developers of the ERP system we work out which developments will be necessary for accounting settlements so that the accounting software will be compliant with the post-transition situation. All transactions that are still accounted for in Hungarian forints, such as tax payment liabilities and salaries, must be treated as foreign-currency transactions in the system after the switch, which means exchange-rate differences need to be settled.
We help to identify accounting solutions for the system-errors arising during the conversion.
During training and consultations we help the staff of the accounting and finance departments prepare for the transition because accounting in a foreign currency requires a significant change of approach.
We offer support in revising accounting policies and other accounting procedures.
We compile the opening balance sheet in the foreign currency. We help in revaluing financial reports previously prepared in the former currency of the articles of association, and where necessary we can also assist during audits of the opening foreign currency balance sheet, providing information, statements and valuations to the auditors.