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Accounting in Germany

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Lisa Cloppenburg

on 14 January 2014

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Transcript of Accounting in Germany

Accounting in Germany
A Comparison between HGB and IFRS

published in 1897
every business person
higher requirements for bigger companies
in German and Euro
Accounting of fixed assets
Accounting of current assets
Table of content
Comparison between HGB and IFRS
Fixed assets
Current assets
Current situation in Germany
1. January 2005 IFRS is oblige for capital market-oriented companies

2009 5.2% published consolidated financial statement IFRS

2009 14 out of 1.1 million companies published separate financial statement under IFRS
Comparison HGB and IFRS

• Information • Information for investors
• Measuring of taxes
• Creditor protection

• Scheduled deprecation • Impairment only approach
(mostly over five years)

• Forbidden for • allowed
fixed assets

of goodwill
Revaluation above the
Current assets
All assets that are not determined to permanently serve the business and are no item of the accrual and deferral.




Cash and cash equivalent

Comparison of accounting
impairment charge on the lower exchange price (market value)

fair value:
market value or exchange price cannot be determined
HGB Standards
Historical cost principle
First time booking value
Asset ceiling of assessment
Possible value decline
used in subsequent measurements
reason for impairment charges
Lowest value principle
Strict lowest value principle
reported at historical costs
strict lowest value principle
--> inventory risks

reported at historical costs
average cost formula for the calculation of inventory

Turkish Airlines
lower value principle
historical cost principle
-->net released value

stated at historical costs
item only other securities - shares of money market funds
emission certificates - counted at historical costs
time deposits: maturity > 3 months
held to maturity securities: no impairment charges or value decrease
stated at historical cost (Turkish GAAP)
no impairment charges
initial recognition: stated at fair value
three categories:
held-for-trading, held-to-maturity, available-for-sale
subsequent measurements category based

Turkish Airlines
Fixed assets
An asset with a long-term useful life that a company uses to make its products or provide its services. Strictly speaking, a fixed asset is any asset that the company does not expect to sell for at least a year, but the term often refers to assets a company expects to have indefinitely.

There are two different kinds of capital assets:

Depreciable fixed assets such as cars, machines, buildings, software or patents which are written off over the economic lifetime

Non depreciable fixed assets such property or securities

According to § 266 HGB are the fixed assets divided into 3 main categories:

intangible assets (patents, software),
tangible assets (buildings, machines) and
financial assets (shares)

 Intangible assets include things like patents and brand recognition, which add value to a company, but are difficult to price. Intangible assets explicitly do not include actual things and can’t be seen or touched.

Intangible assets
Intangible assets

In both companies are the intangible assets valued at the acquisition cost and are depreciated on the systematic depreciation.

--> The difference in self-created intangible assets according to IFRS is the depreciation and the capitalization mandatory whereat in the HGB exist an option for the capitalization.

Intangible assets difference
Tangible assets are any asset that can be seen and touched. They include things that can be reproduced and things that cannot be reproduced. Tangible assets are comparatively easy to price, and therefore they are often
used to express the value of a company.

Tangible assets
Tangible assets difference
Financial assets
Lufthansa --> the financial assets are reported at historical value taking important provision into account.

Turkish Airline--> financial investments are recognized and derecognized on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment.

Financial assets difference

Financial asset is a non-physical asset. Financial assets are distinguished from physical assets like real estate and personal property.
two different methods of assessment
Historical cost principle
Strikt lowest value principle
securities & inventories
Additional calculation methods
FIFO: First-in-first-out

LIFO: Last-in-first-out

HGB --> all methods
IFRS --> no LIFO

Thank you for
your attention!
depreciation is calculated on the basis of the acquisition costs

both companies valued the intangible assets at the acquisition costs and used a systematic depreciation

both companies have similar use of historical cost principle for securities and inventories

HGB not comparable for international investors
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