Brief notes on accounting differences with Anglo-Saxon practices.
In common with many other mainland European states, accounting in Germany is an integral part of the legal framework, governed by detailed rules set by the state. The key users of accounting information in Germany have traditionally been the providers of finance, such as the banks, who obtain information on the financial standing of corporations by having representatives on boards of directors. The importance of loan finance in Germany is reflected in the high average gearing ratios. But this system is slowly giving way to enhanced corporate disclosure driven by the need to seek new sources of capital and entice international investors. .
In 1994, for the first time, three German public companies published their accounts in accordance with the IAS (and with the German commercial code). Following moves by other German companies to bring their accounts in line with the IAS, including the much-publised Daimler-Benz's adoption of US GAAP, and the US listing of Deutsche Telekom, the government signaled that it might be prepared to allow German companies, seeking foreign capital, to use IAS or US GAAP for group accounts, rather than continued enforcement of the requirements of the German commercial code. Legislation was enacted mid-1998 by the German government to formalise this move. The adoption of the Law on Facilitation of Capital Acquisition (KapAEG) means that stock exchange-listed corporations can now opt to prepare consolidated financial statements in accordance with internationally recognised principles (IASs and US-GAAP), without additionally being obliged to prepare the group financial statements according to the German Commercial Code (HGB). .
Exemption from preparing consolidated accounts in accordance with national rules is subject to the following conditions:.
• The parent company must prepare consolidated financial statements in accordance with internationally recognised standards, such as US-GAAP or IASs.
