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Accounting in Germany

Accounting in Germany

Any operating business or organization with any form of economic activities requires an accountant. Germany is not an exception. Accounting in Germany is referred to as the language of business. It is also alternatively dubbed as financial information reporting. Accounting is the means of processing, measuring, and communicating all financial information to the concerned party. This includes but is not limited to the management, creditors, investors, and/or regulators. Accounting in Germany is also divided in many different fields, such as financial, management and tax accounting, and auditing.

  • Financial accounting includes financial statements preparation and financial information reporting to the requesting entity, which is usually external users—suppliers, investors, and regulators. It should be based on the standards of the International Financial Reporting Standards (IFRS). This is basically how accounting in Germany works, as well.Financial accounting includes financial statements preparation and financial information reporting to the requesting entities, which are usually external users — suppliers, investors, and regulators. It should be based on the International Financial Reporting Standards (IFRS). This is basically how accounting in Germany  works.
  • Management accounting is the field of accounting that pertains to the measurement, analysis and reporting of any requested accountable information. All financial transactions are recorded by a bookkeeper, and are summarized to be used as the basis for financial reports. Management accounting is usually requested by the management and is used for internal purposes. In this type of accounting, the GAAP standards may not be used on the measuring and analysis stages but must be based on the cost-benefit analysis of the accountant.
  • Tax accounting is the measurement, processing, and reporting of financial information for tax purposes. Different countries may have different tax accounting principles, and tax accounting in Germany is no different. All of these principles still adopt the GAAP for basis.
  • Auditing differs in all the other fields of accounting as it focuses on the independent examination of all available accounting data, including financial statements, records, performances and operations. This may be requested for internal purposes by the management, though most of the time it is regularly done.

Fees for accounting services in Germany

Accounting in Germany can be considered by the number of invoices, incoming and outgoing transactions and annual turnover (expected). There is a special German law for such calculations. For instance, if you have up to 10 transactions per month and an annual turnover of about EUR50000, the Tax Adviser (Steruerberater) fee will be about EUR50-100 per month.

Accounting in Germany and worldwide involves the use of standard computing devices. These devices are programmed with accounting software that is checked, tried, and tested to perform like an accountant would but with less time and manpower needs. Accounting software and applications are designed by accredited accounting firms.

Accounting in Germany, like in other countries, is regulated by standard-setting organizations, firms and other professional accounting entities. All auditing procedures used in financial statements are carried out under the Generally Accepted Accounting Principles (GAAP). The best examples for these accounting standard setters are the United Kingdom’s Financial Reporting Council and the United States’ Financial Accounting Standards Board (FASB). The International Financial Reporting Standards (IFRS), on the other hand, is the present international accounting standard adopted by most major economies. There are plans during the 2012 meeting of all major accounting economies to eventually adopt these standards.

Other Professional bodies known internationally are the American Institute of Certified Public Accountants (AICPA), CPA Australia, Institute of Chartered Accountants in England and Wales (ICAEW) and the rest of the 179 members of the International Federation of Accountants (IFAC). There are also accounting profession subfields’ professional bodies, including the Chartered Institute of Management Accountants (CIMA). Most of the aforementioned professional bodies are known to provide education as well as training for qualified practitioners in different accounting designations. These include the sought-after titles of certified public accountant and/or chartered accountant.

International auditing firms are now reduced to the Big Four—PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte. These huge auditing firms are the remnants following mergers. It used to be the Big Five but the Enron scandal led to the demise of Arthur Andersen, which is one of the biggest accounting and auditing firms in the world. Aside from the remaining four huge firms, there are still many firms in each country. A good example on this is the accounting in Germany which is still booming. There are many firms to choose from so the challenge is to find the best. This can be done by checking on the standards and basis of the firms, if they comply with all the international standard-setters and abide with the unique country laws.

All of these, including the auditing and accounting in Germany, are governed by the International Auditing and Assurance Standards Board. The International Ethics Standards Board for Accountants (IESBA), on the other hand, is the standard setter for every country member’s Code of Ethics for Professional Accounts. The International Accounting Education Standards Board (IAESB) is the accounting education standard setter. The International Public Sector Accounting Standards Board (IPSASB) is the standard setter for accrual-based international public sector.

SSome standards are country-specific. This is best exemplified by the Financial Accounting Standards Board (FASB) of the United States. It is the governing body that sets the Statements of Financial Accounting Standards. These standards formed the US GAAP. Another is the Financial Reporting Council (FRC) of the United Kingdom. Accounting in Germany is no different. It also has its sets of laws and standards that are distinct from the internationally accepted GAAP. Topping these are the Deutsches Rechnungslegungs Standards Committee (DRSC) or the German Accounting Standards Committee (GASC), the Deutscher Rechnungslegungs Standard (DRS) or the German Accounting Standard, the Deutsche Vereinigung für Finanzanalyse und Anlageberatung e.V. (DVFA) or the German Association of Financial Analysis and Investment Consulting, the Partnership with a limited liability company as general partner GoB Grundsätze ordnungsmäßiger Buchführung (GmbH & Co KG) or Generally Accepted Accounting Prinicples, the Institut der Wirtschaftsprüfer (IDW) Institute of Professionally Qualified Auditors.

Accounting laws governing the accounting in Germany are the Aktiengesetz (AktG) or Stock Corporation Law, Bürgerliches Gesetzbuch (BGB) or Civil Law, Einkommensteuergesetz (EStG) or the Income Tax Law, Einkommensteuerrichtlinien (EStR) or Guidelines on Income Tax Law, GmbH-Gesetz (GmbHG) or Limited Liability Companies Law, Handelsgesetzbuch (HGB) or Commercial Code, Einführungsgesetz zum Handelsgesetzbuch (EGHGB) or Introductory Law to the Commercial Code, Gesetz zur Kontrolle und Transparenz im Unternehmensbereich or Law on Control and Transparency within Enterprises, Publizitätsgesetz (PublG) or Publicity Law, and Sonderausschuss Bilanzrichtlinien-Gesetz des IDW (SABI) or Special Committee of the IDW for the Accounting Directives Law.

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