Comparative Accounting : Germany

1. Comparative Accounting : Germany 8335116615 DwiYunita Sari 8335118318 Rizqi Amelia Pratiwi 8335118326 Syifa Aulia 8335118330 Ruth Citra Permata

2. Germany Background • European Union’s largest country, population 83 million. • West Germany and East Germany established in 1949, were reunified in 1990. • Historically, banks have been primary source of finance via both loans and equity. • Since reunification, the economy has been affected by internationalization.

3. Germany Background • German companies increasingly listing on foreign exchanges, e.g., New York Stock Exchange. • Most common business forms are Aktiengesellschaft (AG) and GesellschaftmitbeschrankterHaftung (GMBH). • Historically had significant influence on accounting systems in a number of other countries. • Japan’s commercial code is modeled on Germany’s

4. Germany Business Organization GmbH AG KGaA

5. Auditing is dominant part of profession and certified auditors title of Wirtschaftprufer (WP) was created in 1931. Obtaining WP title is extremely rigorous. Get WP title from Auditor join Steuerberater

6. Accounting Profession

8. Germany Accounting Regulation • Commercial code and tax laws are main sources of accounting rules. • Stock exchange rules have less influence than in U.S. • Prudence is fundamental, recognition of revenues only when realized, losses when they appear possible. • Began change away from creditor orientation in 1960s. • Starting in the 1980s, EU directives began having major influence.

9. Germany Accounting Principles and Practices • Historical cost attribute for measuring tangible assets is strictly adhered to. • Traditional focus on creditor protection is at odds with the true and fair view concept. • Importance of tax laws led to the reverse authoritative principle which requires expenses to be deducted from accounting income if they are to be tax deductible. • Differences between accounting and tax income are minimal, thereby reducing need for deferred taxes.

10. Germany Accounting Principles and Practices • In contrast to China, conservatism has been used to resist labor’s wage demands. • Standards allow for income smoothing, frequently accomplished via early recognition of losses. • EU fourth directive requires true and fair view, but Germans have a unique interpretation of the concept. • Commitment to globalization reflected in rule that allows public companies to use IFRS for consolidated statements. • Main intention of German Accounting Law Modernization Act is conformity with IFRS. • In August 2010 only about 10 German companies were listed on the NYSE due to NYSE overregulation.

11. Germany Differences with IFRS • Goodwill – deducted immediately against equity, whereas, under IFRS 3, accounted for as an indefinite life intangible asset. • Internally generated intangibles – not recognized, whereas, under IAS 38, recognized as an asset under some conditions. • Leases – accounting uses tax rules, with capitalization rare, whereas IAS 17 criteria result in more frequent capitalization. • Accounting for subsidiaries – allow exclusion of dissimilar subsidiaries, which are consolidated under IAS 27.