Focus on accounting standards: clarity and practical relevance

The most important facts in brief:

Accounting standards are binding regulations that structure the preparation of company financial statements and make them comparable. International standards such as IFRS and IAS create globally uniform principles, while national standards such as the German Commercial Code (HGB) are specifically tailored to Germany.

Compliance with these standards ensures comparability, transparency and legal certainty. International companies benefit from the harmonization provided by IFRS, while the GAS, under the direction of the GASC, specify national requirements.

New projects, such as harmonization within the EU, facilitate access to capital markets and strengthen user confidence in financial reporting.

What are accounting standards?

Accounting standards are structured guidelines that define how companies should prepare their annual financial statements and consolidated financial statements. They define uniform principles for accounting, income statements and other disclosures in financial reporting. The aim is to ensure comparability, transparency and legal certainty.

Historical development of accounting standards

The origins of accounting standards go back to a time when growing markets and social demands on financial reporting made uniform regulations necessary. The founding of the IASB (International Accounting Standards Board) in 2001 marked an important milestone: the introduction of IFRS (International Financial Reporting Standards) created a framework that serves international markets.

In Germany, the requirements of the German Commercial Code (HGB) have played a central role for decades. They are supplemented by the German Accounting Standards (DRS), which are developed and regularly updated by the DRSC (German Accounting Standards Committee) .

The most important elements of the accounting standards:

• Basic principles: Consistency, comparability and truthfulness.
• Application: Mandatory for publicly traded companies, voluntary for other companies.
• Main components: Balance sheet, income statement, notes and management report.

Objectives of the accounting standards

1. Create comparability: Standardized rules allow investors to easily compare different companies.
2. Promote transparency: Clear regulations create trust in the financial information provided.
3. Provide a legal basis: They ensure compliance with the requirements of legislators and international organizations.

Did you know? IFRS have been introduced in over 140 countries and are regarded as the global standard for financial reporting. In Germany, listed companies use these standards, while smaller companies generally adhere to the German Commercial Code (HGB).

Why are accounting standards important?

Accounting standards are of central importance for creating confidence in financial reporting and meeting the requirements of investors, regulatory authorities and other stakeholders. Their relevance is particularly evident in the following aspects:

Comparability and transparency

Uniform standards such as IFRS ensure that the financial statements of internationally active companies are comparable across borders. This makes it easier for investors, banks and other users of the financial statements to make important decisions.

A practical example: without uniform standards, the results of a German company (according to HGB) could not be directly compared with those of a company in the USA. The application of IFRS solves this problem.

Legal certainty and efficiency

Accounting standards form a binding basis that gives companies legal certainty when preparing their financial statements. They are also a tool for promoting efficiency by providing clear guidelines that standardize the reporting process.

Access to international markets

Compliance with international standards such as IAS or IFRS is a prerequisite for companies seeking access to global capital markets. Listed companies in the EU are even legally obliged to apply these standards in their consolidated financial statements. This not only creates confidence among investors, but also makes it easier to raise capital.

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Advantages at a glance

• Transparency: Increases confidence in financial reports.
• Comparability: Creates uniformity between national and international degrees.
• Legal certainty: Minimizes accounting risks.
• Competitive advantage: Facilitates access to international markets.

Interesting: While German companies often use HGB-based financial statements for tax purposes, they fall back on IFRS for capital market-oriented financial statements - an example of dual accounting.

International Financial Reporting Standards (IFRS)

The International Financial Reporting Standards (IFRS) are global accounting standards developed by the International Accounting Standards Board (IASB) . Their aim is to create a uniform global basis for financial reporting that ensures transparency, comparability and efficiency. The IFRS are binding in over 140 countries, particularly for listed companies.

What makes IFRS special?

IFRS follows a principles-based approach that focuses on economic reality and not just legal requirements. Important principles include:

• Fair value measurement: Assets and liabilities are often measured at fair value.
• Comprehensive information: The reports provide detailed information on the net assets, financial position and results of operations.
• Global comparability: Companies worldwide can be analyzed on a uniform basis.

Difference between IFRS and national standards

In contrast to national regulations such as the German Commercial Code (HGB), IFRS have an international focus. Some key differences:

• Economic substance vs. legal form: IFRS place emphasis on the actual economic substance, while the HGB is more strongly oriented towards legal form.
• Flexibility: IFRS offers scope for interpretation in order to reflect the specific circumstances of companies.
• Tax orientation: The HGB is more strongly oriented towards tax requirements, which is not the case with IFRS.

Advantages of IFRS for companies

1. Easier access to capital markets: IFRS financial statements are recognized worldwide, an advantage for companies that operate internationally.
2. Better investor communication: The transparency of the reports strengthens investor confidence.
3. Greater comparability: companies from different countries can be analyzed more easily.

Challenges of IFRS application

Despite their advantages, IFRS also present challenges:

• Complexity: The extensive regulations are often difficult for smaller companies to implement.
• High implementation costs: training and IT systems require significant investment.
• Scope for interpretation: These can lead to different applications, which can impair uniformity.

Comparison of IFRS and HGB

German accounting standards (HGB and DRS)

In Germany, accounting standards are largely shaped by the German Commercial Code (HGB) and the German Accounting Standards (GAS). These national regulations focus on the preparation of annual and consolidated financial statements and are of central importance for medium-sized and large companies.

The HGB as the basis for accounting

The HGB is the most important German accounting law. It serves as the legal framework within which companies must prepare their financial statements.

Key features of the HGB:

• Tax orientation: The results of the commercial balance sheet are often also the basis for the tax balance sheet.
• Principle of prudence: Profits may only be reported once they have been realized. Losses, on the other hand, must be recognized immediately.

The role of German Accounting Standards (DRS)

The DRS supplement the HGB regulations and are developed by the German Accounting Standards Committee (DRSC). These standards specify the requirements for financial reporting and promote the comparability of financial statements.

For example, the DRS 18 standard sets out the requirements for the management report.

Purpose of the German accounting standards

The purpose of the German standards is to create a clear and uniform basis for the task of financial reporting. They provide users, including auditors, banks and investors, with a reliable insight into a company's financial position.

Interesting: Companies in Germany can voluntarily waive the application of DRS as long as they are not capital market-oriented groups. However, IFRS is mandatory for these companies if they are listed on the stock exchange.

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The practice: How companies implement accounting standards

The correct implementation of accounting standards is essential in order to meet the requirements of legislators and investors. This process requires a clear strategy, suitable tools and trained teams. But what exactly does implementation look like in practice?

Step 1: Analyzing the requirements

The first step is to identify the relevant standards. While international companies often have to apply IFRS, smaller companies often stick to HGB.

Typical questions are:

• What standards apply to the company?
• Are there any specific regulations or changes that need to be taken into account?
• Which accounting standards are voluntary and which are mandatory?

Example: A medium-sized company with foreign subsidiaries decides to introduce IFRS in order to ensure international comparability.

Step 2: Implementation and processes

Implementation requires:

1. Training: Employees must be regularly informed about changes, such as new requirements like IAS 1 or IFRS 16.
2. Software solutions: Modern tools automate processes such as the preparation of financial statements and compliance with new regulations.
3. Internal control systems: Regular audits ensure that implementation meets the requirements.

Step 3: Overcoming challenges

Companies often face the following problems during implementation:

• Costs: New requirements such as IFRS 16 increase the cost of IT conversions and consulting.
• Complexity: Smaller companies in particular struggle with the detailed implementation of the regulations.
• Changes: The dynamic nature of new regulations, for example from the EU, requires continuous adjustments.

Advantages and criticisms of accounting standards

Accounting standards have a major impact on financial reporting and bring both benefits and challenges. A clear consideration of these aspects helps companies to optimize their accounting strategy.

Advantages of accounting standards

• Comparability: Standards such as IFRS enable investors and analysts to compare financial data between different companies and countries in a uniform manner.
• Transparency: Uniform regulations create trust in the information published, especially for listed companies.
• Legal certainty: By complying with the regulations, companies can ensure that they meet legal requirements.
• Market access: International accounting standards make it easier for companies to access global capital markets.

Criticism of accounting standards

• Complexity: Many companies, especially smaller ones, are confronted with a multitude of regulations that are difficult to implement.
• High costs: The introduction and application of the standards requires investment in IT systems, training and external consultants.
• Different interpretations: Standards such as IFRS offer scope for interpretation, which can lead to differences in application.
• Adaptation effort: Regular changes such as new EU regulations or revised standards increase the effort for companies.

Frequently asked questions

What accounting methods are there?

A basic distinction is made between national and international accounting . In Germany, national accounting is based on the German Commercial Code (HGB) and the German Accounting Standards (GAS). These standards are primarily geared towards legal and tax requirements.
The International Financial Reporting Standards (IFRS), which were developed by the International Accounting Standards Board (IASB), apply at international level. These standards aim to achieve uniform and global comparability of financial reports.

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What is an accounting standard?

Accounting standards are sets of rules that standardize the preparation of annual and consolidated financial statements. They specify how financial information must be presented and accounted for in order to ensure transparency, comparability and legal certainty. These standards serve as a basis for companies to present their financial position correctly and comply with legal requirements. Examples include the German Commercial Code (HGB) and international IFRS.

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What German accounting standards are there?

Accounting in Germany is mainly regulated by the German Commercial Code (HGB). The HGB specifies how companies must prepare their financial statements and takes tax aspects into account to a large extent.
This is supplemented by the German Accounting Standards (GAS), which are developed by the German Accounting Standards Committee (GASC). These standards specify the legal requirements of the HGB and promote uniform application, particularly for capital market-oriented companies.

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What is the difference between IAS and IFRS?

The International Accounting Standards (IAS) were the original standards developed by the predecessor of today's IASB. Since 2001, they have been replaced by the International Financial Reporting Standards (IFRS) , which are also issued by the IASB. However, many of the old IAS standards, such as IAS 1 (Presentation of Financial Statements), are still valid. The IFRS stand for the further development and adaptation to modern requirements of global financial reporting.