It can be said that there is a strong movement towards global harmonization of accounting standards despite various national GAAP, particularly German, being substantially different. There are already great successes achieved, such as IAS adoption in EU and Australia, however, there is still considerable work that has to be done in order to not only impose international standards but also achieve better compliance and interpretation. With regard to Germany, reasonable attempts have been made to adopt IAS, however, there are many transition difficulties due to great discrepancies between IAS and HGB which need to be addressed in order to achieve successful transition.
Table of Contents
1. Introduction
2. Issues behind EU’s decision to adopt IAS
3. Transition process in Germany
3.1 German national accounting system
3.2 Main areas of transition difficulty
3.3 Evaluation of success of transition
4. Conclusion
Objectives and Topics
This paper provides an analysis of the accounting standard harmonisation process in Europe, focusing specifically on the transition from the German national accounting system (HGB) to International Accounting Standards (IAS). The primary research aim is to investigate the drivers for the European Union's adoption of IAS and to evaluate the practical challenges and the success of the implementation process within the German business landscape.
- Reasons and motivations behind the EU's decision to mandate IAS.
- Characterisation of the traditional German accounting system and its legal foundations.
- Identification of primary obstacles and transition costs for German companies.
- Evaluation of compliance rates and the impact of the transition on accounting quality.
Excerpt from the Book
German national accounting system
In Germany accounting procedures are enacted by the legislature and codified in the German Commercial Code (Handelsgesetzbuch, HGB); they further closely follow the requirements of the German taxation law (Whittington, G., 2008, pp499-500). Additionally, HGB is accompanied by standards and norms established by court decisions and reporting practice (Ernstberger and Vogler, 2008, p345).
As opposed to the Anglo-Saxon approach, German legal system has been considered as a unique branch of the Romano-Germanic family, government dominated and strongly contained in law (Roberts et al., 2002, p295; Alexander and Nobes, 2004, p85). According to Gray (1988), German accounting system can be classified as a mixture of uniformity and flexibility, characterized by a moderate professionalism, marginal conservatism and strong secrecy. This is partly due to the long history of Germany’s debt finance thus the market capitalization of German public companies is typically very low.
In particular, banks are important owners of many German companies. Given that banks approach lending as a long-term arrangement leading to creation of many informal links and so called ‘relationship’ banking, the need for published financial information is much smaller due to private access to company’s information (Roberts et al. 2002, p300; Perera et al. 2010, p15). As a result, financial reporting has been mainly invented to serve government purposes. Furthermore, this practice is not only embedded in tradition and protected through law but is also considered to be safe despite German companies having often high gearing ratios (Alexander and Nobes, 2004, pp96, 396).
Summary of Chapters
Introduction: This chapter outlines the scope of the paper, introducing the analysis of accounting harmonisation in Europe and the specific focus on the transition process in Germany.
Issues behind EU’s decision to adopt IAS: This section details the economic and regulatory pressures leading to the EU's move toward global accounting standards, highlighting the need for increased comparability and reduced capital costs.
Transition process in Germany: This chapter covers the historical structure of German accounting (HGB), the significant difficulties faced during the move to IAS, and a statistical evaluation of the transition's success.
Conclusion: This chapter synthesizes the main findings, noting the progress of harmonisation while acknowledging that transition challenges persist due to fundamental differences between national and international systems.
Keywords
International Accounting Standards, IAS, IFRS, German Commercial Code, HGB, Harmonisation, Financial Reporting, Accounting Quality, Transition Costs, European Union, Capital Market, Compliance, Accounting Standards, GAAP, Enforcement
Frequently Asked Questions
What is the core subject of this paper?
The paper examines the harmonisation of accounting standards in Europe, specifically focusing on the adoption of International Accounting Standards (IAS) and its implementation within the German economic environment.
What are the central themes discussed?
The central themes include the drivers of global accounting harmonisation, the divergence between the German HGB and international standards, the operational challenges of transition, and the resulting changes in accounting quality.
What is the primary research goal?
The primary goal is to analyse the reasons behind the EU's move to mandate IAS and to assess the success and difficulties of the transition process for German companies.
Which methodology is applied?
The paper relies on a comprehensive literature review and an analysis of secondary data, including reports from enforcement bodies like DPR-FREP and empirical studies on compliance and accounting quality.
What topics are covered in the main section?
The main section addresses the traditional characteristics of the German accounting system, the costs and complexities of shifting to IAS, and the impact of the transition on financial reporting compliance.
Which keywords define this work?
Key terms include IAS, IFRS, HGB, European Union, financial reporting, accounting harmonisation, compliance, and accounting quality.
How does the "principle of congruence" affect German accounting?
The principle of congruence (Maßgeblichkeitsprinzip) creates a strong link between commercial accounts and tax accounts, often leading to the undervaluation of assets and overvaluation of liabilities to build legal reserves.
Why have German companies traditionally resisted Anglo-Saxon accounting models?
Resistance is largely attributed to deeply embedded cultural characteristics such as risk-averseness and conservatism, which clash with the 'fair value' principles proposed by international standards.
- Quote paper
- Linda Vuskane (Author), 2010, The adoption of International Accounting Standards in Germany, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/156388
