.
• The exempt financial statements must be in conformity with the 7th Directive of the European Commission. .
• The consolidated corporation's accounts must be in conformity with the statutory Commercial Code. .
• The notes to the financial statements must stipulate which accounting principles have been applied and provide a commentary on accounting, valuation, and consolidated methods that deviate from German rules. .
The listing on the New York Stock Exchange has been, for many German corporations, associated with a heavy and costly requirement of such standards which has deterred them from following this path. Several, however, have adopted international accounting standards, publishing consolidated accounts according to US GAAP and IASC methods.
Accounting Procedures.
In broad terms, German accounting rules are characterised by a high degree of prudence, no doubt influenced by the key users of financial statements and their importance in German business culture - the banking community. This is reflected, for instance, in the required valuation method based on a strict form of historical cost, in order for tax values to be objective and auditable. It is also used in the determination of distributable income. Indeed, tax accounting in Germany can play havoc with accounting information provided in non-consolidated accounts, making it difficult to compare accounting results with those of US or UK companies, although deferred tax accounting of late has mitigated some of the impact. .
Probably the most important characteristic of German accounting is its invention of the Kontenrahmen (GKR) - the Chart of Accounts -, providing a detailed, standardised nomenclature of account codes for assets, liabilities, capital, revenue and expenses. Currently, there are two charts of accounts operative in Germany; the older GKR and the more recent Industriekontenrahmen (IKR). Both of these are voluntary but are widely used by German corporations.
