Major changes in German accounting law are under discussion

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10 Dec 2007

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).

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.
Click to view German Accounting Law Modernisation Act (BilMoG) (PDF 651k, German language).

 

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