1 / 35

National accounting system Germany

National accounting system Germany. Presented by Joanna Wolak, Natalia Waskowska, Elisa Biesold, Aleksandar Doychev. 1. History of accounting In Germany. History of accounting In Germany. Relatively brief history

spatty
Download Presentation

National accounting system Germany

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. National accounting system Germany Presented by Joanna Wolak, Natalia Waskowska, Elisa Biesold, Aleksandar Doychev

  2. 1 History of accounting In Germany

  3. History of accounting In Germany • Relatively brief history • In 1937 general accounting standards and principles were codified for the first time In the Stock Corporation Law ( Aktziengesetz ) • Reaktion to the large number of companies going bankrupt during the worldwide economic crisis of the late 1920s 1930s • The next modification of law took place in 1965 • Aim of change à to protect the interest of creditors

  4. History of accounting In Germany • Until 1985 there were no other specific regulations, neither for other corporations like limited liability companies • No bindings rules for nonstock corporations and those companies could be highly flexible in their accounting approaches à for non-stock company accounting was impacted by tax law • In 1985 the existing regulatory system was completely changed à The main part of EC directives was incorporated in the German Commercial Code HGB ( Handelgesetzbuch )

  5. History of accounting In Germany • The second big change was about supplementary rules, that were codified in separate laws for specific legal forms ( Stock Corporation Law, Limited Liability Company Law) as well as for specific industries ( Banking Law, Insurance Supervisory Law ) • The third change concern to modifications of specific provisions for large non-corporations from 1969

  6. History of accounting In Germany • IAS Regulation of the European Union (2002) From 2005: Mandatory application of IAS/IFRS for consolidated financial statements of companies with listed securities in the EU • Bilanzrechtsreformgesetz (2004) Transformation of IAS Regulation into German law

  7. 2 Elements of financial statements

  8. Elements of the financial statements • Balance sheet / statement of financial position – Report of assets, liabilities and equity as of aspecific date – Individual elements are measured and grouped according to legal requirements • Assets ordered according to liquidity (§247 HGB, §266 GCC): – Non-current assets (Analagevermögen) – Current assets (Umlaufvermögen) • Liabilities and O/E ordered according to maturity and creditors – O/E – Long-term liabilities – Short-term liabilities

  9. 3 Present Accounting Legislation

  10. Present Accounting Legislation • German accounting regulation is codified in the German Commercial Code (‘Handelsgesetzbuch’—HGB—) • applies to all legal forms of economic undertakings • German GAAP (Generally Accepted Accounting Principles) = legal concept • "financial accounting leads tax" principle • tax accounts are generally based on the annual financial statements

  11. Present Accounting Legislation

  12. Present Accounting Legislation - Merchant status • Merchant is everybody who conducts a commercial trade (§ 1 (1) GCC) • Every business enterprise is a commercial trade unless a mercantile business operation is not required according to the enterprises‘ type and scope (§ 1(2) GCC) • Two types: Factual merchants, Legal-form merchants

  13. Present Accounting Legislation - General rules for merchants • Obligation for bookkeeping (§ 239 GCC) • Obligation for inventory-taking (§ 240 GCC) • Listing of all individual assets and liabilities • Obligation to prepare financial statements (§ 242 GCC) • Balance sheet • Profit/Loss statement

  14. Present Accounting Legislation • Definition of size classes for corporations (§ 267 GCC)

  15. Present Accounting Legislation - Management report • Medium and large corporations are obliged to prepare a management report • Written report with mostly qualitative information from management • Mandatory elements § 289 (1) GCC • Other elements § 289 (2) GCC

  16. 4 Practical example - Lufthansa

  17. Deutsche Lufthansa AG Balance sheet as of 31 December 2016

  18. Deutsche Lufthansa AG Balance sheet as of 31 December 2016

  19. Deutsche Lufthansa AG Income statement for the financial year 2016

  20. 5 Accounting policies and valuation

  21. Consolidated financial statements • Not needed for taxation purposes • Basic provisions are in Articles 290-315 GCC • IFRS is applicable • Conditions to publish: • Exercising control over one or more companies • Having majority of voting rights

  22. Consolidated financial statements • Harmonization of the fiscal year for all companies (based on single entity theory) • Forms of consolidation: • Full - 50% or more of voting rights • Proportional • Equity accounting for associated enterprises (20%-50% voting rights)

  23. Consolidated financial statements • Deviations for non-corporations • To be prepared only if control is exercised • Article 253 GCC can be applied • Capital consolidation • Purchase method Art.301 GCC (book and fair value) • Pooling of interest method, Art 302 GCC

  24. Consolidated financial statements • Debt and income consolidation: International accounting principles are applied • Deferred taxation - Art.306 GCC as difference • Foreign currency translation - No rule in GCC so IAS 21 used in practice • Consolidation of joint ventures and associated companies - GAS 9; GAS 8; Art.311 GCC Goodwill

  25. Single entity financial statement: Fixed assets • Intangibles: • Concession; Goodwill; Advanced payments • PPE • Land, Land rights and buildings, Technical equipment and machinery; other equipment; factory and office equipment; advanced payment and asset under construction • Valuation at acquisition or manufacturing cost • No general rule for method of depreciation

  26. Single entity financial statement: Fixed assets • Inventories: • Raw material and supplies • Work in progress • FInished goods and merchandise • Advance payments • Valuation at lower historical cost or market value • Acquisition cost - FIFO or average cost

  27. Single entity financial statement: Financial assets • Disclosure of: • Shares in affiliated company; • Loans due from affiliated company; • Participation; • Loans due from companies in which participation is held; • Securities held as long-term investment; other loans • German provisions regarding financial assets differ from international standards

  28. Single entity financial statement: Equity • Capital reserve • Revenue reserve • Liabilities • Accruals • Special items • Deferred income and prepaid expenses - neither asset nor liability

  29. Single entity financial statement: Income taxes • Corporate income tax - • tax rate of 15% • Federal level • But effective rate between 30% and 33% • Solidarity surcharge of 5.5% on CIT • Trade tax • 3.5% base times municipal multiplier (350-400% on average) • On municipal level • Transparent taxation of partnerships • Trade tax has to be paid

  30. 6 Development of accounting in Germany

  31. Harmonization • IAS regulation of the EU in 2002. From 2005 mandatory application of IAS/IFRS for consolidated financial statements • Bilanzrechtsreformgesetz in 2004 - transformation of IAS into German Law • Accounting Directive Implementation Act (BilRUG) - alignment with directive 2013/34/Eu

  32. Reporting according IFRS • Obligation to report according IFRS • Consolidated financial reports of capital-oriented companies • Option to report according IFRS • Consolidated financial reports of other companies • Voluntary report according IFRS • Single financial statement

  33. 7 Future development

  34. Future development • National policies • Possibility of conflict with EU legislation • EU policies • EU law overrides national legislation • Harmonization • Future EU directives to be expected • Uncertain future plans

More Related