Accounting in Germany. Thomas Westphal

to the Regulation of the European Parliament and the Council of 19 July 2002, listed companies in the European Union must prepare their consolidated accounts in accordance with International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS) from 2005 (comparative figures for 2004). This was the EU's reaction to the requirements of international stock exchanges, which demand financial statements in accordance with the legal provisions of their country as a prerequisite for admission to trading. In the meantime, the original regulation has been replaced by Regulation No. 1126/2008. The application of the IAS / IFRS of the EU is today regarded as equivalent to the national financial statement requirements at the stock exchanges of almost all countries. In its catalogue of measures published on 25 February 2003, the German government reacted to the demands of the EU Commission. In addition, non-listed companies were granted an option to apply IAS / IFRS in their consolidated financial statements. With the Accounting Law Reform Act, the obligation to apply IFRS was also extended to those companies whose securities are not yet traded but are in the process of being admitted (cf. § 264d HGB).

      According to tax law

      Derivative (derived) accounting obligation

      "Any person who is required by any law other than the Tax Acts to keep books and records relevant to taxation shall perform the obligations incumbent on him under the other laws also for taxation."

      - Section 140 of the German Fiscal Code (AO)

      Original accounting obligation

      "Commercial entrepreneurs as well as farmers and foresters who, according to the findings of the tax authority for the individual enterprise

      Turnover, including tax-exempt turnover, with the exception of turnover pursuant to section 4 no. 8 to 10 of the Turnover Tax Act, of more than 600,000 euros (until the end of 2015: 500,000 euros) in a calendar year or

      (omitted)

      Self-managed agricultural and forestry land with an economic value (...) of more than 25,000 euros or

      a profit from commercial operations of more than 60,000 euros (until the end of 2015: 50,000 euros) in the business year or

      a profit from agriculture and forestry of more than 60,000 euros (until the end of 2015: 50,000 euros) in the calendar year

      are obliged to keep accounts for this business and to prepare financial statements on the basis of annual inventories, even if an obligation to keep accounts does not result from section 140 [see above]".

      - Section 141 (1) sentence 1 AO

      However, this does not apply to the so-called liberal professions, such as lawyers, tax advisors or doctors, for whom there is basically no obligation to keep accounts. The only exception to this is if the business in question is operated in the legal form of a corporation or trading company, for example a tax consultancy firm run as a limited liability company (GmbH) - in this case, Section 6 (1) of the German Commercial Code (HGB) (Formkaufleute) would apply and require bookkeeping.

      However, the original obligation to keep accounts only applies from the business year following the notification by the tax office that the limits have been exceeded. It does not end until the end of the business year following the determination of the underrun.

      Nature of the accounts

      Section 238 HGB stipulates:

      "The bookkeeping must be such that it can provide an expert third party with an overview of the business transactions and the situation of the enterprise within a reasonable period of time. The business transactions must be traceable in their origin and processing.

      An "expert third party" can be a tax official who checks the accounts as part of an external audit. However, an expert third party can also be a family member or a donor who wants to convince himself that his money is well invested on the basis of the books of account.

      In the Fiscal Code, these provisions are also supplemented from a tax perspective. If the bookkeeping does not meet the requirements, for example because documents are missing, the tax authorities can estimate the bases of taxation according to § 162 AO.