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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)

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chapter 11

Chapter 11

Financial Reporting in Germany

slide2

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)
  • Link between financial and tax accounting regulated by law

1870 - 1892

For all companies: „German Accepted Accounting Principles“, obligation to publish financial accounts depending on legal form (HGB)

1897

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

slide3

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)

First Level:

Differentiation by Legal Form

Part one: all merchants

Part two: supplementary rules for corporations

Part three: cooperatives

Second Level:

  • 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

German Accounting Legislation

1985

slide4

German Accounting Legislation

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)

1998

Implementation of EU-Directive, IFRS-Regulation (BilReG)

2004

current

  • Modernisation of German Accounting Legislation
  • Globalisation and Internationalisation drive further Developments
  • Importance of Information
  • Several Criteria for Differentiation between different GAAP
slide5

Group Accounts

Individual Accounts

IFRS

MANDATORY

since 2005

Member State

Option

LISTED Companies

Member State

Option

Member State

Option

NON-LISTED Companies

IFRS Regulation – Member State Options

slide6

Member State Options – Germany

Group Accounts

Individual Accounts

IFRS

MANDATORY

since 2005

IFRS: Prohibited

German GAAP

Accounts

Still Mandatory

LISTED Companies

Obligation Effective from 2007

for Listed debt instruments and users of US GAAP

Large Companies may file IFRS financial statements with the Federal Gazette

IFRS: Option

IFRS: Prohibited

German GAAP

Accounts

Still Mandatory

NON-LISTED Companies

slide7

Characteristics of German Accounting Legislation

Objective / Purpose

  • Single Financial Statements:
  • determine distributable profits
  • tax purposes
  • information, stewardship
  • Consolidated Financial Statements:
  • provide Information

Investor oriented

Creditor oriented

Focus

  • Realisation Principle
  • historical cost convention
  • no recognition of unrealised gains

German Accepted Accounting Principles

Prudence: Imparity Principle

  • Anticipation of Losses
  • recognition of expected or unrealised losses required
  • principle of lower of cost or market value (write- downs)
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