Obligations under the Accounting Act:

Under the Accounting Act, a company that has any two of the following three indicators above the following thresholds at the balance sheet date in any two - consecutive - financial years preceding the financial year will be required to prepare a sustainability report:

(a) the balance sheet total is HUF 10 000 million,

(b) the annual net turnover is HUF 20 000 million,

(c) the average number of employees during the financial year is 250,

Under the transitional provisions, the sustainability reporting requirements laid down in the Accounting Act will apply for the first time to the financial year starting in 2025.

Therefore, based on the above, those who meet the two conditions for the years 2024 and 2023 are required to prepare a sustainability report.

The Accounting Act provides an exemption for those whose parent company in an EU Member State prepares a consolidated report and discloses it accordingly.

Obligation under the ESG Act:

Reporting under the ESG Act is required for companies that are established in Hungary.

A large enterprise that is a public-interest entity is a large enterprise for which any two of the following three indicators exceeded the following thresholds at the balance sheet date in the financial year preceding the financial year:

(aa) the balance sheet total is HUF 10 000 million,

(ab) the annual net turnover is HUF 20 000 million,

(ac) the average number of employees is 500;

A large enterprise which, at the balance sheet date of the financial year preceding the financial year, had any two of the following three indicators above the following thresholds:

(ba) the balance sheet total is HUF 10 000 million,

bb) the annual net turnover is HUF 20 000 million,

bc) the average number of employees is 250; and

Small and medium-sized enterprises qualifying as an enterprise of public interest.

Under the transitional provisions, large enterprises that are considered to be public interest entities will apply for their activities in the financial year 2024 and will prepare and publish their first ESG report in 2025.

Large companies shall apply for their activities in the financial year 2025 and prepare and publish their first ESG report in the year 2026.

Small and medium-sized enterprises that qualify as public interest entities will apply it to their activities in the financial year 2026 and prepare and publish their first ESG report in the year 2027.

Therefore, based on the above, a large company that meets the two conditions in 2024 will be required to prepare a sustainability report.

No consolidation exemption can be claimed for ESG reporting, so compliance with this legislation may be different from compliance with sustainability reporting.

If you have any questions on the above, our advisors will be happy to assist you.