chapter 11
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Chapter 11
Financial Reporting in Germany
German Accounting Legislation
1861 First Uniform Accounting Regulation independent of legal form or size of entities (AGHGB)
1870 - 1892
• Accounting Laws differentiating between legal forms, e.g. corporations, partnerships (e.g. AktG, GmbHG)
• Link between financial and tax accounting regulated by law
1897 For all companies: „German Accepted Accounting Principles“, obligation to publish financial accounts depending on legal form (HGB)
1931- 1965
Continuing differentiation: accounting regulations for corporations; in addition: differentiation between sizes (Aktienrechts(not)verordnung, AktG)
Focus of accounting regulation: corporations = differentiation by legal form
1969 New level: Accounting regulations mandatory for all legal forms, but dependent on size (PublG) = differentiation by legal form and size
German Accounting Legislation
1985 • Implementation of 4th, 7th and 8th European Directives (BiRiLiG) and
• Restructuring of German Accounting Legislation from fragmentation by laws specific to legal forms to generally accepted principles for all entities
• First time: broad accounting regulations for all companies within the German Commercial Code (Third Book of HGB)
Differentiation by Legal FormPart one: all merchantsPart two: supplementary rules for corporationsPart three: cooperatives
Differentiation by Size• Corporations and commercial partnerships (part two):
small, medium-sized, large• Other companies must comply with PublG when certain
size criteria are met
First Level:
Second Level:
German Accounting Legislation
1998 Option for capital market oriented companies to prepare their consolidated financial statements in accordance with internationally accepted accounting standards (US GAAP, IFRS) (KapAEG) = additional differentiation by capital market orientation and form of financial statement (single or consolidated)
• Modernisation of German Accounting Legislation
• Globalisation and Internationalisation drive further Developments
• Importance of Information
• Several Criteria for Differentiation between different GAAP
current
2004 Implementation of EU-Directive, IFRS-Regulation (BilReG)
IFRS Regulation – Member State Options
Group Accounts Individual Accounts
LIS
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ies
NO
N-L
IST
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C
om
pa
nie
s
IFRS MANDATORY
since 2005
Member State Option
Member State Option
Member State Option
Member State Options – Germany
IFRS: Prohibited
German GAAP Accounts
Still Mandatory
Group Accounts Individual Accounts
LIS
TE
D
Co
mp
an
ies
NO
N-L
IST
ED
C
om
pa
nie
s
IFRS MANDATORY
since 2005
Obligation Effective from 2007 for Listed debt instruments and users of
US GAAP
IFRS: Option
IFRS: Prohibited
German GAAP Accounts
Still Mandatory
Large Companies may file IFRS financial statements with the Federal
Gazette
Characteristics of German Accounting Legislation
Consolidated Financial Statements:
• provide Information
Objective / Purpose
Single Financial Statements:
• determine distributable profits
• tax purposes
• information, stewardship
Prudence: Imparity Principle
German Accepted Accounting Principles
Creditor oriented
Investor oriented
Focus Realisation Principle
• historical cost convention
• no recognition of unrealised gains
Anticipation of Losses
• recognition of expected or unrealised losses required
• principle of lower of cost or market value (write- downs)
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