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Peculiarities of Corporate Financial Reporting in Germany

The obligation to submit financial statements is an attribute of entrepreneurial activity. These accounts show the property and financial position of the company and the results of its business activities in the reporting period. They are, in addition to the information function, a basis for the taxation of the company and the determination of dividends. 

The German Commercial Code (HGB) regulates the basic requirements for the financial accounting of companies in Germany. The main components of the annual financial statements are:  

  • A balance sheet;  
  • The profit and loss statement;
  • Explanatory notes; 
  • A management report on the company's status and prospects. 

Financial Reports in Germany: Structure and Characteristics 

Reports are the company's financial statements for a quarter (3 months) or a year. Accordingly, they consist of such reports: 

  • Statement of loss and profit;
  • Balance sheet; 
  • Cash flow statement; 
  • A statement of changes in equity; 
  • As well as explanations, plans, and strategies of the company. 

First and foremost, any report is a very large amount of information, so, it is important to make it structured and submit it within a specified time frame.  

Important side note: Clevver is developing a new service called the Compliance Center. This compliance center will have a compliance calendar included that will help entrepreneurs globally to keep up with the regulations of different countries and inform about important due dates for filings. The Compliance Center will be launched in a first Beta version in July/August. 

Financial reporting requirements vary depending on the size of the organization. Companies doing business in Germany are divided into small, medium, and large enterprises. The criteria for classifying the size of a company are the sum of the balance sheet, the annual turnover, and the number of employees. 

The requirements for the financial statements of the company and a number of simplifications in the financial accounting of businesses directly related to the size of the company. The latter also affects the records’ composition and content, the timing, and the scope of their publication. 

Thus, the smallest and medium-sized enterprises, besides a number of other simplifications, are given the possibility to publish financial statements in abbreviated form. Medium-sized enterprises also enjoy a number of exemptions from the general requirements for financial reporting. 

Financial Statements 

The length of the fiscal year is determined in the shareholders' agreement, with the fiscal year not exceeding 12 months. A trading company is obliged to keep accounting records. They must include a balance sheet (annual balance sheet) and a profit and loss account. In addition, the annual financial statements must contain records with explanatory notes. These must be in German. The annual financial statements must comply with accounting standards of Germany and the European Union, give a true picture of the company's assets, finances, and profits. 

§§ 325-329 of the German Commercial Code (HGB) provide strict rules for the disclosure of the annual financial statements of capital companies. The directives also apply to trading companies (general partnerships) and limited partnerships in which the company is not the personally liable partner.  

Tax Reporting 

A tax year is a calendar year. Tax returns are filed for the company's fiscal year ending in the respective calendar year. The standard filing date for returns is by July 31. Tax returns are filed electronically. Quarterly provisional tax payments are made during the year with a final payment at the end of the year. 

IFRS System 

IFRS (International Financial Reporting Standards) records is company's financial statements prepared in accordance with international standards for a wide range of users. It is used by companies that list their shares and securities on European financial markets, as well as control the activities of subsidiaries and branches. The purpose of the IFRS reports is to present information on the financial position and results of the company operation. 

The main standard, which regulates the formation of the financial statements in accordance with IFRS is IAS 1 "Presentation of Financial Statements". It defines the criteria of its compliance with IFRS rules, as well as requirements regarding materiality, continuity of operations, obligatory components of financial statements. The standard contains recommendations on the preparation of each of the main reporting forms and establishes general requirements for the recognition and evaluation of records of subjects of operations. 

Bottom Line 

A company's financial statements are data that reveal the company's current economic situation, performance, and changes in financial position. Statements are made from accounting data. These papers must be prepared in the right form (German national standards and IFRS) and be submitted in the appropriate time frame.

Clevver is developing a new service called the Compliance Center that will assist entrepreneurs with a compliance calendar and inform them about important filings and due dates. The service will be available in July/August 2021 in the form of a web application and it will be completely free of charge. If you are interested in the new Clevver Compliance Center or general information regarding the assistance with the registration of companies globally, our Clevver Team is always there to help.

DISCLOSURE NOTICE: Any legal or tax information in this communication (including any attachments) is for information purposes only and not intended to be used as tax or legal advice. The author is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant or ClevverLegalServices LLP for individual consultation.