Companies from the Medium-sized companies increasingly have to deal with the rules of international accounting. The advantages of IFRS lie mainly in greater transparency, especially when comparing company financial statements. Thereby the international Accounting standards should be harmonised so that financial statements are internationally comparable.
IFRS rules mandatory?
Admittedly, there is only an obligation to apply international accounting for companies operating on the capital market. Nevertheless, the introduction of IFRS is for ever global Sometimes it is worthwhile for small and medium-sized enterprises. There is a considerable difference between the German HGB and IFRS. IFRS primarily aims to provide investors with the information they need to make decisions. The HGB is more concerned with the protection of creditors under commercial law.
Conversion HGB to IFRS
There is no doubt that the conversion from HGB to IFRS in a medium-sized company involves considerable effort not only in the accounting connected. This is often impossible without the help of external consultants. In this context, it is important to carefully weigh up whether supposed advantages, e.g. with regard to improved financing possibilities, justify the increased effort involved in the introduction of IFRS.
Brochure on the topic International Financial Reporting Standards
Of the BDI has published a brochure on IFRS together with the banking association and Ernst&Young.
Under the title "International Financial Reporting Standards also for SMEs? becomes Pros & Cons the introduction of the rules of international accounting.
The distinctions between IFRS and HGB are of considerable importance and have decisive differences, which are examined in more detail below.
IFRS and HGB have different objectives. While IFRS is mainly aimed at equipping investors with the knowledge they need to make decisions, the HGB is more focused on protecting creditors.
Accounting also differs significantly between IFRS and HGB. IFRS is based on the fair value measurement concept, which provides for the measurement of assets and liabilities at current market value. In contrast, the HGB relies on the principle of prudence, which aims for a more conservative valuation and often values assets at the time of acquisition or production.
There are also clear differences between the two standards with regard to depreciation. The useful life of fixed assets is more flexible in the International Financial Reporting Standards and can be adjusted to the actual useful life. The depreciation methods and periods, on the other hand, are generally subject to stricter regulations in the HGB.
Another important aspect concerns consolidation. Compared to the HGB, the IFRS consolidation standards are more comprehensive and in-depth. For example, IFRS prescribes the use of the equity method for joint ventures and affiliated companies, whereas this is not the case in the HGB.
In order to meet the information needs of investors, IFRS are more detailed in the notes and the management report. The disclosure standards of the HGB are generally less stringent. In this context, it should be mentioned that the International Financial Reporting Standards require detailed reporting on all of a company's business segments in order to give investors a better understanding of its business activities. Segment reporting, on the other hand, is not explicitly mentioned in the HGB.
In summary, the International Financial Reporting Standards promote greater transparency and global comparability of company financial statements. In contrast, the HGB is oriented towards more conservative accounting and valuation principles and places more emphasis on the protection of creditors.
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