chapter 11
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Chapter 11. Financial Reporting in Germany. German Accounting Legislation. First Uniform Accounting Regulation independent of legal form or size of entities (AGHGB). 1861. Accounting Laws differentiating between legal forms, e.g. corporations, partnerships (e.g. AktG, GmbHG) - PowerPoint PPT PresentationTRANSCRIPT
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
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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
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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)