1. BY:
FELIX KIZITO OTOO
ACCOUNTING SYSTEM IN
GERMANY

2. CONTENT:
 Accounting Organizations in Germany
 Accounting Standards In Germany
 Integration Of IFRS Into The German Financial Reporting
Standards
 Accounting Scandals In Germany
 Accounting Qualification In Germany

3. THE ASCG
The Accounting Standards Committee of Germany (ASCG) was established in 1998
as standardization organization and has since then been the institution carrying
the technical committees. The ASCG is a registered, not-for-profit association
domiciled in Berlin.
Objectives:
According to the Constitution of the ASCG, the association's work pursues the
following :
1. The objectives of the Association are, in the general economic interest,
 to develop recommendations for the application of principles for
consolidated financial reporting;
 to provide advice on planned legislation on accounting regulations at
national and EU level;

4.  to represent the Federal Republic of Germany in international accounting and
financial reporting bodies;
 to develop Interpretations of the international accounting standards within the
meaning of section 315a(1) of the German Commercial Code (HGB);
 to enhance the quality of accounting and financial reporting;
 to promote research and education in the above-mentioned areas.
2. The Association serves the aims of its members under the Constitution within
the framework of its own objectives. It fulfills its objectives as a professional
association for its members.
3. The Association acts in a non-profit capacity. The generation of profit is not its
primary objective. It may only use revenue from the exploitation of its work for
the objectives set out in the Constitution.
4. The Association may establish business operations to implement and
promote its objectives under the Constitution. It may also take out
memberships and acquire equity in-vestments.

6. Institute of Public Auditors ( Institut der Wirtschaftsprüfer )
It is a privately run organization established to serve the interests of its members
who comprise both individual Wirtschaftsprüfers (German Public Auditors) and
Wirtschaftsprüfungsgesellschaften (German Public Audit firms).
The IDW was established on a voluntary basis rather than having been established
under German law. In accordance with its Articles of Incorporation, the IDW does
not operate as a commercial business and is a non profit organization.
Membership as of 31 December 2009 was 12,979 full members, of whom: 11.959
are Wirtschaftsprüfers (87% of all Wirtschaftsprüfers) and 1.020 are
Wirtschaftsprüfungsgesellschaften.

7. The IDW’s role is to:
o Represent the professional interests of its members at both national and
international levels
o Undertake technical work relevant to the fields in which its members are
active
o Provide training courses and support for trainee Wirtschaftsprüfer and
continuing professional development for qualified Wirtschaftsprüfer
o Provide support to members on technical issues in their day-to-day work

8. Chamber Of Public Accountants - Wirtschaftsprüferkammer (WPK)
The Wirtschaftsprüferkammer (WPK) is a corporation under public law, whose
members are all German public accountants (Wirtschaftsprüfer) , German sworn
auditors (vereidigte Buchprüfer) who are licensed auditors in public practice
authorized to perform only statutory audits of annual financial statements of
mid-sized German limited liability companies, German public audit firms
(Wirtschaftsprüfungsgesellschaften ) and German firms of sworn auditors
(Buchprüfungsgesellschaften ) in Germany.
The WPK is headquartered in Berlin and is competent for its more than 20,000
members throughout Germany.

9. The general duties of the Chamber of Public Accountants are :
o exercise professional supervision over its members which is not given in the
jurisdiction of the Attorney General;
o Perform quality control procedures
o Conduct nationwide audit examination
o To appoint auditors and certified public accountants or accounting firms as
well as to evoke their appointment or recognition
o To advice their members and organize teaching programs

10. Accountant Groups In Germany (AGIG)
It was formed in 1980. The AGIG is funded by six Accountancy bodies and this
funding is coordinated through the Consultative Committee of British and Irish
Accountancy Bodies (CCAB).
It currently represents more than 700 professionally qualified Accountants
resident in Germany.
The AGIG is run by a committee elected by the members at the Annual General
Meeting each April. Their principal goals are to encourage networking
between members, to develop relationships with local professional bodies and
to help with continuing professional education (CPE).
Their main contact with its members is through the Seminars which holds
twice a year in Frankfurt.

11. Federation Of European Accountants (FEE)
FEE is the voice of the European accountancy profession toward the EU
institutions and other international organizations.
It is an international non-profit organization based in Brussels that represents 45
institutes of professional accountants and auditors from 33 European countries,
including all of the 27 EU Member States.
FEE’s objectives include analyzing and contributing to professional, regulatory
and public policy developments of relevance to the profession, ensuring
Member Bodies’ timely information and offering leadership in representing
the profession. FEE also promotes cooperation between its Member Bodies.
In representing the European accountancy profession, FEE recognizes the
public interest.

12. ACCOUNTING STANDARDS IN GERMANY
German Generally Accepted Accounting Principles
The German Generally Accepted Accounting Principles ( German GAAP ) are
principle-based accounting standards. They consist of underlying principles, that is
the principles of proper bookkeeping, GoB, which are codified and non-codified.
The source for codified GoB and the majority of further accounting standards is the
the German Commercial Code (HGB).
As a result of lack of legal requirements details for specific accounting issues,
additional literature and court decisions interpreting accounting issues were made
essentially part of the German accounting system. The German GAAP evolved over
time and adjusted gradually to changes in the accounting environment.

13. Financial statements according to the German GAAP are not only prepared to
churn
out information to investors. They also function as the basis to determine
distributable profits which serve to protect creditors of the company.
The creditor protection is the predominant objective in Germany. As a result,
German GAAP focuses on capital maintenance because creditors are mainly
interested in the capital remaining in the company to build up and strengthen the
capacity to repay when due.
Since capital maintenance is generally sought by creditors, the German GAAP
comprises of numerous principles which together form a prudent accounting system.
An important feature of this system is the “imparity principle”, which splits up into
o Realization principle
o Principle of anticipation of loss

14. The realization principle ensures that only realized gains are recognized as profits.
The anticipation of losses principle requires accounting for unrealized losses.
Eg. Property costing €1 million whose value increased over time ( fair value = 2 million )
is still measured as cost in the balance sheet.
If the value decreases ( 0.5 million ) the property is impaired and has to be written down
in the balance sheet to the lower value, with the impairment loss recognized in profit
and loss.
As a result, increases and decreases in value are treated differently as German GAAP
follow a strict “lower of cost or market principle”

15. Looking at the German GAAP from an international accounting perspective, they are
not popular in part because of the following features of German GAAP :
o Too creditor-oriented and thus too much emphasis on the prudence principle
o Tax accounting affects commercial accounting and distorts the objectives of the
commercial balance sheet.
o artificial stabilization of profits by building up and reducing hidden reserves, thereby
Making it difficult to identify a company crisis and then only possibly with a time-lag
until hidden reserves are used up.
o Major recognition and measurement issues are not explicitly addressed within the
German Commercial Code.
o Too many accounting policy choices. E.g. In relation to goodwill or measurement of
inventories.

16. Integration Of IFRS Into The German Financial Reporting Standards
When Germany realized that both previous European efforts to harmonize
accounting regulation and existing German GAAP did not live up to the
expectations and demands of German capital market-oriented companies,
Germany responded and opened its accounting system to internationally
accepted accounting standards before any European legal measure on the
application of IFRS was decided upon.
In 1998, listed companies were allowed to prepare consolidated financial
statements in accordance with internationally accepted accounting standards
( IFRS ) or US-GAAP instead of German GAAP.

17. Germany has chosen a less rigorous approach on the implementation of IFRS.
Listed
Companies
Group Accounts:
IFRS is
mandatory
Individual
Accounts: IFRS is
prohibited
Non-Listed
Companies
Group Accounts:
IFRS is optional
Individual
Accounts: IFRS is
prohibited

18. Procedure of transition into IFRS:
Define
objectives of
consolidated
financial
statement as
part of
overall
company.
Analysis of
differences
between
existing
German
GAAP and
IFRS
Development
of sample
financial
statement
Revision of
in-house
group
guidelines
with regards
to
accounting.
Find out if
necessary
information
is available
including the
previous
year.
Test run and
analysis of
the
transformed
company
data

19. ACCOUNTING SCANDALS IN GERMANY
Arcandor AG (2009 )
Arcandor is a holding company in in Essen, Germany that oversees companies
Operationg in the business of mail order and internet shopping, department stores
And tourism services.
On June 2009, the company announced it could no longer pay rent for its department
Stores which the company had previously sold and lease backed.
After struggling to maintain business levels at its brand names Karstadt and
KaDeWe, Arcandor sought help from the German government to the tune of 650
million euros as loan, and then filed for insolvency.

20. Schlecker ( 2012 )
Schlecker is a German company with headquarters in Ehingen which, before its
bankruptcy, had a workforce of some 52,000.
There were stores across Europe including Germany, Austria, the Czech Republic,
Luxembourg, Portugal, Poland, France, Spain and Italy.
Schlecker announced the closure of half its shops across Germany with effect
from 29 February 2012.

21. Other accounting scandals includes:
 Lockheed Bribery Scandal
 Danat Bank Scandal in 1931
 Friedrich Krupp AG in 1873

22. ACCOUNTING QUALIFICATION IN GERMANY
Whilst there are a number of routes to
qualification, most students will first qualify
as a ‘Steuerberater’ (A chartered German
‘Tax adviser’), which comprises three written
examinations and one oral examination
before deciding to move onto the
Wirtschaftspruefer.
Qualified Tax Advisers qualify to take the Wirtschaftspruefer by passing several
qualifying exams before taking seven written exams.
There are relatively few Steuerberaters and Witschaftpruefers in Germany. On a
long term average only 50% of applicants are successful.

23. DANKE !!!!!!!