The German accounting and publication rules are codified in various laws supplemented by German Accounting Standards GAS. Within the framework of this website, it would be impossible to cover every particular rule. Accordingly, all rules and regulations specifically relating to registered cooperatives, as well as to companies of particular industries such as banks and insurance companies, are not commented on further. This limits the range of entities taken into account to the following:
Generally, all of the above entities have to follow the guidelines of the German Commercial Code HGB. For non-corporations that exceed certain size criteria the accounting, auditing, and publication rules of the Publicity Law have to be observed in addition to the Commercial Code.
For consolidated financial statements, especially for those of capital market orientated companies, additional accounting standards as outlined in German Accounting Standards GAS have to be observed.
As a general rule applicable for all businesses, financial statements are to be drawn up in accordance with generally accepted accounting principles (Sec. 243 (1) HGB).
For corporations and since 1999 for CorpCo’s, the general rule has been expanded. Their financial statements must, in compliance with generally accepted accounting principles, present a true and fair view of the net worth, the financial position, and the results of the company (Sec. 264 (2) HGB).
Both general rules require that the financial statements comply with German GAAP, which mostly were incorporated in the third book of the German Commercial Code. They can be briefly summarized as follows:
Deviations from the above principles are allowed only to the extent that exceptional circumstances exist. It should also be noted that in accordance with the prudence principle, provisions and allowances can be set up if it is possible, but not necessarily probable, that an asset has been impaired or a liability has been incurred.
As mentioned earlier, the general rule for corporations requires not only that their financial statements comply with above GAAP, but also that they provide a true and fair view of the net worth, financial position and results of the company. This principle is influenced by international accounting principles but its interpretation in Germany may be different compared to international standards. It has been the dominant opinion in Germany for many years that compliance with legal requirements ensures a true and fair presentation, even if the law allows exceptions from GAAP, for instance, the creation of hidden reserves.
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