• Germany is included in the IFAD GAAP Convergence Studies
• National Professional Organisation Website: Institut der Wirtschaftsprüfer in Deutschland
• National Professional Organisation Website: Wirtschaftsprüferkammer
  
• Standard Setter Website: Accounting Standards Committee of Germany (ASCG) English version
• Response to IFAC Member Body Survey on Standard Setting and Regulation

Updates

Adoption of IFRSs in Europe Effective in 2005

In June 2002, the European Union adopted an IAS Regulation requiring European companies listed in an EU securities market, including banks and insurance companies, to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. EU countries have the option to:

• Require or permit IFRSs for unlisted companies.
• Require or permit IFRSs in parent company (unconsolidated) financial statements.
• Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007.
• Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007.

The European IAS regulation applies not only to the 27 EU Member States but also to the three members of the European Economic Area (EEA) – Iceland, Liechtenstein, and Norway.

Germany is an EU Member State. Consequently, German companies listed in an EU/EEA securities market follow IFRSs since 2005. In July 2010, the European Commission published the results of a survey of the 27 EU member states and the 3 EEA member states regarding the four options above. For information on each country's plans, click to download:

• Table on Use of IFRS Options in 30 EU Member and EEA States (PDF 64k)

The European Commission has adopted the following wording for use in the notes to the accounts and in the audit reports of companies subject to EU Regulation 1606/2002/EC (the 'IAS regulation'):

• "in accordance with International Financial Reporting Standards as adopted by the EU" or
• "in accordance with IFRSs as adopted by the EU".

Companies may also state, in a footnote, compliance with IFRSs as adopted by the IASB, if that is the case.

In September 2011, the European Commission services published a report an update on the extent to which certain options included within the Accounting Directives have been incorporated into the law of the Member States and EEA countries. Please click for access to the report (PDF 816k, link to EC website).

Consistent with the Directives, Germany has adopted the following requirements:

Deloitte Germany offers a German translation of IAS Plus including all news stories and background material. The information is supplemented with news from Germany, Austria, Switzerland and Liechtenstein: www.iasplus.de. There is also an overview of all IAS Plus German language publications available on the site.

IFRS model financial statements 2010

Deloitte (Germany) has published IFRS Musterkonzernabschluss Dezember 2010 – Model IFRS Financial Statements for 2010 in the German language (PDF 1,567k, 124 pages). Each item in the financial statements is cross-referenced to the relevant source in IFRSs.

IFRS presentation and disclosure checklist 2010

Click here for the IFRS Checkliste zu Ausweis- und Angabevorschriften 2010 (PDF 2,808k, 184 pages), published by Deloitte & Touche GmbH (Germany). It is the German translation of the 2010 IFRS Presentation and Disclosure Checklist.

German Standard Setter announces new presidency and membership of new technical committees

After months of debate and renewed efforts to find sustainable financing, the General Assembly of the ASCG found in May 2011 that a German Standard Setter can continue to exist. The new supervisory board held its inaugural meeting in September 2011, and today the members of the new technical comittees and the new presidency were announced.

Ms. Liesel Knorr, President of the German Accounting Standards Board, will continue as new president and will head the two new technical committees – one for IFRSs and one for German GAAP. Among the members appointed to the IFRS technical committee is Dr. Andreas Barckow, head of Deloitte SE's IFRS Leadership Team, head of Deloitte's Frankfurt IFRS Centre of Excellence and member of the Global IFRS Leadership Team (GILT) of Deloitte.

More information on the new committees is available on the ASCG website (German / English).

Accounting for Financial Instruments in accordance with IFRSs and HGB

Dr. Knut Henkel, the author of the PhD Thesis Eine unternehmenstypenspezifische Synopse der Rechnungslegungsunterschiede von Finanzinstrumenten nach IFRS und HGB, has kindly given us permission to make his book available IAS Plus. The thesis systematically compares the requirements of the International Financial Reporting Standards (IFRSs) and of the codification of German accounting standards (Handelsgesetzbuch, HGB). The comparison extends to the IFRS for SMEs and the German Act to Modernise the Accounting Law (Bilanzrechtsmodernisierungsgesetz, BilMoG). Dr. Henkel's thesis tries to quantify the differences and analyses their relevance for different types of companies (eg banks, capital market oriented companies, mid tier companies). Click to download Eine unternehmenstypenspezifische Synopse der Rechnungslegungsunterschiede von Finanzinstrumenten nach IFRS und HGB (German language, 4.48mb). Dr. Henkel is also the author of a bilingual English / German guide on accounting for financial instruments under IFRSs and HGB (published 2009, 11.2mb).

GASB's final comment letter on IASB ED Mandatory Effective Date of IFRS 9

The German Accounting Standards Board (GASB) has finalised its comment letter regarding the Exposure Draft: Mandatory Effective Date of IFRS 9. Please click for access to the comment letter (link to ASCG website)

German translation of the 2011 'Red Book'

The IASB has announced the availability of a German translation of the 2011 International Financial Reporting Standards ('Red Book'). The Red Book contains the official pronouncements issued by the IASB as at 1 January 2011 and includes IFRSs with an effective date after 1 January 2011, but not the IFRSs they will replace.

The two volume set is available for purchase for €89. Click for more information (link to IASB website, details in German).

Public discussion and EFRAG-ASCG outreach event on 7 October 2011

Minutes and presentations from the joint EFRAG-ASCG event on the IASB consultation on its future work programme are now available on the ASCG website (in English and German).

New supervisory board holds inaugural meeting

The supervisory board of the Accounting Standards Committee of Germany e.V., Berlin, today at its constitutive meeting elected Dr. Ralf Thomas (Siemens AG) as chair, Mr. Frank Reuther (Freudenberg & Co. KG) as vice-chair and Prof. Dr. Norbert Winkeljohann (Price-waterhouseCoopers AG) as treasurer. The new team will promote the reorganisation of the ASCG. "I look forward to the challenges when putting the reorganisation in place", Dr. Thomas declared when elected. "It is important that Germany speaks with a united, competent and clear voice in the international debate. This is the prerequisite for adequately providing for the interests of all listed and non-listed enterprises in our country."

At its meeting on 20 July the general assembly of ASCG approved the revised text of its constitution and elected the members of the supervisory board and the nominating committee, therewith giving the starting signal for the reorganisation. The nominating committee already released the call for applicants for members of the technical committees and the executives in mid August. In late October the supervisory board will receive the list of recommended candidates; the election is scheduled for mid November.

Once the executives – the legal representatives of the association - are elected, the revised constitution can become effective. The technical work will be pursued by the German Accounting Standards Board and the Accounting Interpretations Committee until the handover to the new technical committees can take place.

(Above text is from the ASCG news release)

IFRS 9 Financial Instruments — A practical guide for financial service providers

Deloitte & Touche GmbH (Germany) has published IFRS 9 Finanzinstrumente — Ein Praxisleitfaden für Finanzdienstleister (PDF 813k), a German language guide to IFRS 9 Financial Instruments. This guide deals with the classification requirements of IFRS 9 and explains in detail the new classification model developed by the IASB. The principles behind the new model and possible implemention issues are discussed. The guide also illustrates changed disclosure requirements and the transition requirements. It also includes an overview over the yet unfinished phases of the IASB's project to replace IAS 39.

"IASB proposes deferring IFRS 9 until 2015"

Deloitte & Touche GmbH (Germany) has published IFRS fokussiert: IASB schlägt Verschiebung von IFRS 9 auf 2015 vor(PDF 165k) – summarising the implications of the IASB's Exposure Draft: Mandatory Effective Date of IFRS 9.

"IFRS 9 – Status quo of the IASB's project to replace IAS 39"

Deloitte & Touche GmbH (Germany) has published IFRS fokussiert: IFRS 9 – Status Quo des Projekts zur Ablösung von IAS 39 (PDF 195k) – summarising the progress made for each of the phases of the IASB's project to replace IAS 39.

"Unification of the requirements concerning Fair Value Measurement"

Deloitte & Touche GmbH (Germany) has published IFRS fokussiert: Vereinheitlichung der Vorschriften zur Ermittlung des beizulegenden Zeitwerts(PDF 469k) – explaining the IASB's new standard on fair value measurement.

"April showers bring forth May flowers"

Deloitte & Touche GmbH (Germany) has published IFRS fokussiert: (Nicht) Alles neu macht der Mai(PDF 297k) – explaining the IASB's "package of five" new and revised standards addressing the accounting for consolidation, involvements in joint arrangements and disclosure of involvements with other entities.

German Standard Setter continues to exist

In June 2010, unresolved questions of financing and membership basis had led the Accounting Standards Committee of Germany (ASCG) to terminate, effective 31 December 2010, the standardization agreement with Germany's Ministry of Justice. After months of debate and renewed efforts to find sustainable financing, the General Assembly of the ASCG decided yesterday:

• to continue the ASCG and to tentatively approve a new structure as sketched out below;
• to reform its structure, going from corporate and personal membership to a corporate model where only companies and associations could become members;
• to have a trustee board comprising members from all constituent groups (i.e. [corporate] listed preparers, non-listed preparers, banks, insurers, audit firms, and others), which would be charged with setting the broad strategy of the ASCG;
• to form a nominating committee comprised by representatives from all constituent groups (members of the trustee board cannot become members of the nominating committee though);
• to set up two technical committees comprising a maximum of seven members each with a diverse background; one committee would be charged with IFRSs/international financial reporting matters, the other with German GAAP, respectively; a member’s term would usually be five years (staggered terms will apply at the start of the new structure to ensure that not all members leave at the same time) and can be renewed; and
• to maintain the current German Accounting Standards Board and its interpretative arm, the Accounting Interpretations Committee (AIC), until the new committees have been formed and are ready to start working (presumably 1 October 2011).

Click or the ASCG press release (link to ASCG website).

Two million unique readers on IAS PLUS.de

A German anguage edition of IAS Plus was launched in February 2005. It offers all English language content of IAS Plus in German translation plus additional content with relevance for Germany, Austria, Switzerland and Liechtenstein. Yesterday, IAS PLUS.de reached the milestone of two million unique readers since the start of the page; an avarage of 55.000 unique readers now go to the site every month. Please click for access to www.iasplus.de.

"New attempt by IASB and FASB to revise the impairment requirements"

Deloitte & Touche GmbH (Germany) has published IFRS fokussiert: Neuer Anlauf zur Überarbeitung der Wertminderungsvorschriften von IASB und FASB (PDF 361k) – explaining the main requirements of the impairment Supplement to ED/2009/12 issued by the IASB on 31 January 2011. The IASB and the FASB propose a new approach to recognizing impairment losses for open portfolios of financial assets measured at amortised cost that uses time proportional allocation methods of expected losses. The approach also proposes a good book/bad book structure where expected losses in the bad book would have to be recognized immediately. In addition, the Supplement to ED/2009/12 proposes revised and additional presentation and disclosure requirements.

IFRS presentation and disclosure checklist 2010

Click here for the IFRS Checkliste zu Ausweis- und Angabevorschriften 2010 (PDF 2,808k, 184 pages), published by Deloitte & Touche GmbH (Germany). It is the German translation of the 2010 IFRS Presentation and Disclosure Checklist.

Two surveys amongst German small and medium-sized entities on the IFRS for SMEs

The Accounting Standards Committee of Germany (ACSG) has published the results of two surveys amongst German small and medium-sized entities on their assessment of the IFRS for SMEs.

The first survey that resulted in the Final Report of the Survey on the IFRS for SMEs among German SMEs asked 4.000 non-listed companies regarding the need for the IFRS for SMEs in Germany and their assessment of the requirements of the IFRS for SMEs compared to those under the German Accounting Modernisation Act. The final question was whether the SMEs participating in the survey would consider applying the IFRS for SMEs in their single and/or consolidated accounts if it were legally possible in the future. 14% of the responding entities answered with "yes", 83% with "no". 73% of those who answered with "no" stated that they prefer German GAAP, 17% percent preferred full IFRSs and 10% cited "other reasons".

The second survey that resulted in the Final Report of the Survey on the IFRS for SMEs among German "small" publicly traded entities targeted 342 "small" listed companies (with sales up to 130 million Euro) and analysed their assessment of the IFRS for SMEs in general, compared to full IFRS and advantages or disadvantages in potentially applying the IFRS for SMEs. The survey showed that a majority of the participating publicly traded entities see the IFRS for SMEs as a sensible regulatory alternative that should be available to them. This is in clear contrast to the IASB's intention to exclude publicly traded entities from the scope of the standard.

Click for:

• Final Report of the Survey on the IFRS for SMEs among German SMEs (PDF, 935k, link to ACSG website)
• Final Report of the Survey on the IFRS for SMEs among German "small" publicly traded entities (PDF, 799k, link to ACSG website)
• Access to German language versions of the reports on the ACSG website

IFRS Model Financial Statements for 2010 in German

Deloitte (Germany) has published IFRS Musterkonzernabschluss Dezember 2010 – Model IFRS Financial Statements for 2010 in the German language (PDF 1,567k, 124 pages). Each item in the financial statements is cross-referenced to the relevant source in IFRSs.

German translation of our IFRS in Focus newsletter on leases

Deloitte Germany has published a German translation of our IFRS in Focus newsletter on leases: IFRS fokussiert - IASB gibt Standardentwurf zur Leasingbilanzierung heraus (PDF 488k).

IFRS Model Financial Statements and Presentation and Disclosure Checklist 2009 in German

Deloitte & Touche GmbH (Germany) has published IFRS Musterkonzernabschluss Dezember 2009 – Model IFRS Financial Statements for 2009 in the German language (PDF 2,821k, 128 pages). Each item in the financial statements is cross-referenced to the relevant source in IFRSs.

Click here for the IFRS Checkliste zu Ausweis- und Angabevorschriften 2009 (PDF 1,683k, 180 pages), published by Deloitte & Touche GmbH (Germany). It is the German translation of the 2009 IFRS Presentation and Disclosure Checklist.

Summary of IFRS for SMEs in German

Deloitte Germany has published a Praxis-Forum Alert! newsletter on the new IFRS for SMEs from a German perspective. The newsletter not only explains the new standard (chapters include background, issues deemed irrelevant for SMEs, simplifications, and transition) but also focuses on Germany-specific questions. The newsletter notes that the IFRS for SMEs is not legally effective in Germany and also that German Act to Modernise the Accounting Law (BilMoG) has just been published which might mean that taking over the IFRS for SMEs is less probable. It draws the conclusion that taking over the new standard might be desirable especially from the viewpoint of German SMEs with foreign subsidiaries. Click to Download the Newsletter (PDF 98k, German language).

Newsletter on new German accounting law

On 3 April 2009 the Bundesrat (German Federal Council) approved the Act on Modernisation of Accounting Regulations (Bilanzrechtsmodernisierungsgesetz, BilMoG), thus paving the way for an extensive reform of the German Commercial Code (Handelsgesetzbuch). Deloitte Germany has published a Praxis-Forum Alert newsletter explaining the new law. Click for:

• Newsletter - German Version (PDF 665k)
• Newsletter - English Translation (PDF 817k)

Modernised accounting law adopted in Germany

The German Parliament has passed the Act to Modernise Accounting Law (in German: Bilanzrechtsmodernisierungsgesetz). A goal of the legislation is to reduce the financial reporting burden on German companies. The accounting requirements under the Act are described as an alternative to International Financial Reporting Standards for small and medium-sized companies that do not participate in capital markets. In announcing the new law, the German Federal Ministry of Justice (which administers the Commercial Code (ComC) in Germany) said:

• Companies will be permitted to capitalise internally generated intangible assets, while getting an immediate tax deduction for the costs.
• Financial institutions will measure financial instruments designated as 'held for trading' at fair value, with value changes recognised in a 'special reserve'. The Ministry of Justice press release states: 'This special reserve has to be built up from part of the enterprise's trading profits when times are good and can then be used to offset trading losses when times get worse. Hence this special provision has an anticyclical effect. Here the necessary steps have been taken in order to respond to the financial markets crisis.'
• Special purpose entities that are controlled must be consolidated.

• Ministry of Justice Press Release (PDF 41k).
• Information about the German Accounting Law on the MoJ website.

Newsletter about proposed German 'accounting reform' legislation

In May 2008, the German Government approved a draft 'accounting reform' bill – known as the Act to Modernise the Accounting Law – that is expected to bring about significant changes in how entities report under German GAAP in their individual accounts. Goals of the reform are: deregulation and cost reduction, particularly for small and medium-sized entities, improving the annual financial statements drawn up under commercial law by removing some of the options that were added on the transformation of the EU's Accounting Directives into German law in the mid-1980s, and bringing German GAAP closer to IFRSs. However, the reform is not intended to simply copy the provisions of either full IFRSs or the upcoming IFRS for Private Entities. On the contrary, the German Government envisages a revised Commercial Code to be workable alternative to either of those IFRS frameworks that balances the costs to entities preparing accounts with the information needs of the users of individual financial statements. The bill is a proposal that is still being debated in Parliament and is not yet finalised, so changes may occur. The Government expects adoption of a final version some time towards the end of 2008. Deloitte Germany has prepared an English language version of their Praxis-Forum Newsletter that summarises the proposed changes (PDF 316k, 23 pages).

Major changes in German accounting law are under discussion

On 8 November 2007, the German Ministry of Justice (MOJ) issued for public comment a staff draft of the German Accounting Law Modernisation Act (BilMoG) (PDF 651k, German language). The overall goals of the reform are to (1) modernise the German Accounting Law (Handelsgesetzbuch, or HGB) and (2) reduce regulatory burden on companies. The proposed changes are generally in the direction of closer conformity of the HGB with IFRSs. The bill would also make changes in the areas of auditing, supervisory boards, and audit committees. Important accounting changes include:

• greater recognition of intangible assets (although the related increase in equity would not be available for distribution as dividends)
• special purpose entities controlled by a parent would have to be consolidated
• recognition of deferred tax assets (previously prohibited)
• measurement of financial assets held for trading at fair values in excess of initially recognised costs
• measurement of provisions at discounted amounts
• inclusion of actuarial assumptions in the measurement of pension liabilities
• exemption of small non-listed entities from the requirement to publish HGB-GAAP financial statements

The staff draft is currently out for comment by key interested parties until 8 January 2008. Thereafter, the draft law will be revised based on the comments received by MOJ and then submitted to both chambers of Parliament (the Deutsche Bundestag and Bundesrat) where it will be deliberated for at least several months. Many observers anticipate a heated debate. The original time frame indicated by the MOJ was for publication of the final law in the second half of 2008, with applicability as of 1 January 2009. However, observers suggest that due to significant election dates in 2008 and 2009, that date may not be feasible to uphold.

Germany establishes a financial reporting enforcement mechanism

Under the auspices of the German Federal Ministry of Justice, representatives of 15 professional and industry associations have established the Financial Reporting Enforcement Panel (FREP). The role of the FREP is solely to discover infringements of financial reporting requirements by listed entities, including matters of compliance with IFRSs. It does not have any authority to impose sanctions. The FREP will inform the entity and the government's Financial Services Authority of any possible irregularity it has discovered. Thereafter, the Financial Services Authority has responsibility to take appropriate enforcement action. Click for Announcement (PDF 29k).

Non-listed companies in Germany will be permitted to use IFRS

Non-listed companies in Germany will be permitted to use IFRS, rather than German GAAP, in preparing their consolidated financial statements starting in 2005. For both listed and non-listed companies, statutory (individual company) financial statements would continue to follow German GAAP, though IFRS accounts could be presented in addition. These provisions were set out in a joint announcement by the German Ministries of Justice and Finance in February, updated in May, but not previously reported on IASPlus. Listed companies were already required to switch to IFRS in their consolidated statements starting in 2005 under the European Accounting Regulation.

At the meeting, the GASB also decided that E-GAS 11, Accounting for share option plans and similar compensation arrangements, will not be finalised or re-exposed before an IFRS is published. The Board agreed that activities on financial instruments will not be taken up, before the European Fair Value Directive is implemented into the German Commercial Code. Furthermore, the GASB made the decision that no activities will be pursued on issues related to measuring assets or liabilities at their fair value.

Concerning E-GAS 18, Currency translation, some questions arising while finalizing were solved in the meeting.

As regards IASB's ED 3, Business Combinations, the GASB approved the final text of its comment letter, at its 64th meeting on 7 and 8 April. The letter is available for download from GASC's website.

At that meeting, the Board also discussed how to go forward with the comments received on the draft framework. The Working Group will analyse the comments in detail and prepare proposals to amend the text.At its 66th meeting on 4 June, the GASB considered revising extant German Accounting Standards. A draft will be submitted at the July meeting with the aim of publishing a draft standard containing all paragraphs to be revised with an invitation to comment.

Moreover, the GASB tentatively concluded to hold public discussions on the following IASB projects in late September or early October 2003:

• Insurance Contracts – Phase I.
• Disposal of Non-Current Assets and Reporting of Discontinued Operations (revision of IAS 35).
• Provisions, Contingent Liabilities and Contingent Assets (revision of IAS 37).
• Financial Instruments (possible re-exposure of parts of IAS 32/39).

The following table represents an updated list of current GAS and E-GAS:

The GASC has also published the following position and discussion papers:

The GASB furthermore issued E-GAS 18, Foreign Currency Translation. The main provisions of E-GAS 18 correspond with IAS 21 as potentially amended by the IASB's Improvements Project. The scope of E-GAS 18 also includes provisions concerning financial reporting in hyperinflationary economies. The draft allows for use of several methods to translate hyperinflationary financial statements whereas IAS 29 stipulates a single method. Different results may arise from application of the future standard in respect of deferred taxes due to differences between GAS 10, Deferred Taxes in Consolidated Financial Statements and IAS 12 (see Update July 2002).

In October 2002 GAS 12, Non-Current Intangible Assets and GAS 13, Consistency and Correction of Errors, were published in the Federal Gazette. In order to become effective, a GAS needs to be published by the Federal Ministry of Justice in the Federal Gazette.At its 58th meeting on November 14 and 15, 2002 the GASB decided not to pursue work on E-GAS 17, Revenue, and will rather monitor the international joint project on revenue recognition.

The following table represents an updated list of current GAS and E-GAS:

The GASC has also published the following position and discussion papers:

Status of the Work Programme of the German Accounting Standard Board (GASB)

The status report for the projects currently covered by the GASB`s working groups was updated as of 9 September 2002:

Consolidation of Special Purpose Entities

In 1999, the national professional organisation of auditors (Institut der Wirtschaftspr�fer - IDW) issued a Position on Accounting Questions Concerning the Application of IAS (IDW RS HFA 2), which is continued on a sequel basis. In July the IDW published a draft sequel (Sequel 4), dealing with the consolidation of Special Purpose Entities (SPE) under SIC-12. Sequel 4 especially elaborates on the indicators of control over an SPE given in the appendix to SIC-12. It examines the relationship among these indicators as well as their relationship to provisions of other IAS which cover the allocation of assets, e.g. IAS 17. The main conclusions of Sequel 4 will be sent to the IFRIC for comment on compliance with SIC-12.

• GAS 1a, Exempting Consolidated Financial Statements in Accordance with �292a of the Commercial Code - Consolidated Financial Statements in accordance with US GAAP: Goodwill and Other Non-Current Intangible Assets,
• GAS 10, Deferred Taxes in Consolidated Financial Statements, and
• GAS 11, Related Party Disclosures.

GAS 1a takes the affirmative view that consolidated financial statements drawn up in accordance with internationally accepted accounting principles still meet the requirements for exemption as promulgated by � 292a of the Commercial Code. The revised accounting treatment for goodwill under SFAS 142 would not change this presumption.

GAS 10 refers to deferred tax issues in consolidated financial statements. Contrary to IAS 12, Income Taxes, where the balance sheet liability method is applied, deferred taxes under GAS 10 are based on the income statement liability method. Thus only timing differences affecting the income statement qualify for deferred taxes. However, deviating from current German accounting practice, differences reversing only on the disposal of an asset or liability are also included in the definition of timing differences.

For timing differences arising on consolidation, deferred tax has to be recognised. In contrast to IAS 12 deferred tax is always recognised, irrespective of whether negative goodwill arises or increases.

The provisions of GAS 11 regarding related parties, related party transactions and information to be disclosed are similar to those in IAS 24, Related Party Disclosures. In contrast to the international standard, the scope of GAS 11 requires only capital market oriented companies preparing group accounts to disclose related party relationships. Other enterprises are encouraged to apply the requirements of this standard.

In addition to the above, the GASB issued an exposure draft E-GAS 17, Revenue. This exposure draft addresses the recognition and measurement of revenue from the sale of assets and rendering of services. The scope of E-GAS 17 is more comprehensive than the one in IAS 18, Revenue, in that it also covers construction contracts. The approach of E-GAS 17 aims to establish consistent requirements regarding revenue recognition and measurement. The proposed accounting treatment of E-GAS 17 is similar or even identical to IAS 18 and IAS 11, Construction Contracts. As a major difference E-GAS 17 requires the existence of an actual arrangement or contract regarding the sales of goods or rendering of services before revenue can be recognised.

Various amendments proposed in the TransPuG had already been addressed by the German Accounting Standards Board (GASB) when they issued the exposure draft E-GAS 16 'Duty to Prepare Consolidated Financial Statements and Scope of Consolidation'. E-GAS 16 replaces in fact E-GAS 10, which is no longer considered an exposure draft. However, at its latest meeting, the GASB decided that, given the proposals of the TransPuG, it would not proceed with the due process of E-GAS 16.

Corporate Governance Codex Published

Another step to enhance the acceptance of German companies by international investors is the publication of the German Corporate Governance Codex (the Codex) by the government commission 'Corporate Governance Codex', in February 2002. Among other issues the Codex addresses reporting and auditing requirements for annual financial statements. It is recommended that consolidated financial statements and interim reports be prepared under internationally accepted accounting principles. Furthermore, the Codex calls for extended disclosures such as compensation of the members of the Management Board or information regarding stock option programs. Compliance with the Codex is on a voluntary basis only. Some German blue chips have already declared that they would follow the Codex.

Auditing Guidelines on First-Time Application of IAS

The national professional organisation of auditors (Institut der Wirtschaftspr�fer (IDW)) published an Accounting Practice Statement (IDW RH HFA 1.003) which provides guidelines regarding the first time application of IAS for interim reports. This Accounting Practice Statement has primarily been issued because companies listed on the SMAX segment of the German Stock Exchange are required to prepare financial statements under IAS starting 2002. This Practice Statement requires an opening balance sheet to be prepared for the current period, as well as for the previous period, as if IAS had always been applied. Since comparative IAS financial statements are not available to investors, interim reports should provide information regarding significant accounting policies applied under IAS, particularly stating differences from accounting policies applied under German law.

E-GAS 14 defines an intangible asset similar to IAS 38, Intangible Assets, setting three critical attributes: identifiability, control and future economic benefits.

There is a rebuttable presumption that the useful life of an intangible asset does not exceed twenty years. The key differences to IAS 38 are that capitalisation of development costs, as well as a revaluation to fair value, will not be allowed under the proposed standard.

The objective of E-GAS 15 is to set forth the treatment of changes in accounting principles, changes in accounting estimates and correction of errors with regard to the principle of consistency. Concerning changes in accounting principles and correction of errors, the proposed standard provides for a treatment similar to the allowed alternative of IAS 8, Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies, paragraphs 38 and 54. Changes in accounting estimates shall be treated in a manner similar to IAS 8.26.

The GASB also approved E-GAS 1a as a draft addendum to GAS 1, Exempting Consolidated Financial Statements in accordance with � 292a HGB (German Commercial Code). E-GAS 1a was issued for comment at the end of October 2001. The draft discusses whether consolidated financial statements prepared in accordance with US GAAP meet the requirement to be in conformity with the 7th EU Directive taking into consideration that goodwill and certain other intangible assets are no longer amortised. E-GAS 1a takes an affirmative position regarding such conformity.

• E-GAS 12, Deferred Income Taxes in Consolidated Financial Statements; and
• E-GAS 13, Related Party Disclosures has been published for comment.

The E-GAS 13 related party definition depends on a shareholder relationship or membership of a governing body of the reporting enterprise.

• GAS 5, Risk Reporting - effective for financial years beginning after 31 December 2000;
• GAS 7, Presenting Equity in Consolidated Financial Statements - effective for financial years beginning after 30 June 2001; and
• GAS 8, Accounting for Investments in Associates - effective for financial years beginning after 30th June 2001.

The following GASC exposure drafts have also been issued:

• E-GAS 10, Duty to prepare Consolidated Financial Statements and Scope of Consolidation; and
• E-GAS 11, Accounting for Stock Options and Similar Forms of Compensation.

Deutsche Boerse - German Stock Exchange

Effective 1 January 2002, companies listed in the SMAX, the index for small caps, are required to prepare financial statements using either IAS or US-GAAP. In addition the financial statements have to be published in English. These changes to the segment for small caps are part of the Deutsche Boerse's program to increase transparency and to further attract foreign investors.

As a result of these changes, the accounting standards requirements for companies listed in the different segments of the Deutsche Boerse are as follows:

• In general, the primary source for accounting requirements is the German Commercial Code (Handelsgesetzbuch - HGB). In 1998 a new section 292a HGB was introduced, allowing companies listed in a German stock exchange to prepare their consolidated financial statements using either IAS or US-GAAP instead of German GAAP. As a consequence, nearly all large companies listed in the DAX are taking advantage of this exemption rule.
• Depending on the segment companies are listed in or for which they are applying for a listing, IAS or US-GAAP become mandatory. Companies listed in the "Neuer Markt", the New Economy segment (counterpart to the NASDAQ), are already required to use either IAS or US-GAAP on preparing their financial statements. With the new requirements IAS or US-GAAP are now mandatory for small caps.

Standard Setting in Germany

In addition to the introduction of the above described exemption rule, standard setting in Germany was reformed in 1998: the German Accounting Standards Committee (GASC), a private standard setting body, was established to reform German accounting regulations concerning consolidated financial statements. Its objective is to harmonise German accounting standards with international standards (IAS/US-GAAP), by the end of 2004. As accounting regulations in Germany are normally established through the law, the standards of the GASC have to be approved by the Minister of Justice and published in the federal gazette (Bundesanzeiger) to become legally effective. Currently, the following standards have been either published or drafted:

The GASC has also published the following position and discussion papers, the comment periods for which have already lapsed:

• Position Paper 1 - Accounting for Share Option and Similar Compensation Plans
• Position Paper 2 - Group Accounting by Insurance Enterprises
• Discussion Paper - Uniform Purchase Accounting