Brigitte Eierle

The Adaptation of German Accounting Rules to IFRS: A Legislative Balancing Act

ABSTRACT The accounting strategy of the EU Commission for the last ten years, which reached one of its goals with the Regulation on IAS, is challenging all EU Member States. This article gives an analytical insight into the way the German legislator has confronted this challenge. It explains the statutory changes introduced to adapt the accounting regime in Germany, against the background of arguments for reform and proposals which have been put forward in the German accounting literature and by influential interest groups. The major characteristics of the governments accounting strategy are analysed: an increasing focus on the macroeconomic benefits of adequate accounting regulations, a perception of accounting as a material part of the corporate governance regime, greater weight given to the notion of public interest and the information function of accounting, a focus on consolidated accounts for the revision of existing rules, and, at the same time, considerable reluctance to change any recognition and measurement rules for individual entity accounts. In general the accounting reform strategy of the German government can be characterized as being slow, conservative and reactive, following a marginal step-by-step approach.

Does Size Influence the Suitability of the IFRS for Small and Medium-Sized Entities? -- Empirical Evidence from Germany

This study is set within the context of the IASBs initiative to develop an IFRS for small and medium-sized entities (SMEs). It is based on a questionnaire survey of small and medium-sized entities in Germany exploring the suitability of the IASBs proposed SME standard for entities of different size classes. Quantitative size criteria are used in many national jurisdictions to differentiate financial reporting requirements between entities. However, there is very little empirical evidence on the question whether the economic size of an entity has an impact on the economic issues that should be regulated by accounting rules and on managements preferences for specific accounting methods. This paper addresses these deficiencies by exploring to what extend an entitys economic size has an impact on its international exposure, the relevance of specific accounting issues and preparers’ perceptions on costs and benefits associated with the application of selected accounting methods. Our findings are ambiguous. Size effects are revealed with regard to the structure of entities, their international exposure and to a large extent to the relevance of particular accounting issues. Cost and benefit assessments of accounting methods also differ within and between the size clusters investigated, albeit a generalisation of size as a factor determining the cost-benefit considerations of firms with regard to particular accounting treatments and methods is not supported by the studys results.

Differential reporting in Germany – A historical analysis

Abstract Based on a contingent perspective of accounting change, this paper reviews the historical development of differential reporting in Germany, by drawing on primary and secondary sources. The main objective of the paper is to shed light on the driving forces and main influential parameters that have shaped the existing differential reporting framework. This historical approach supplies interesting insights for the current discussion on differential reporting in Germany produced by the EU Regulation on the application of International Accounting Standards.

German Reporting Practices: An Analysis of Reconciliations from German Commercial Code to IFRS or US GAAP

This paper presents the results of research analyzing reconciliations of net income and stockholders’ equity from reports prepared according to Germanys Commercial Code (HGB) to either International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP). We describe the distribution of the reconciling items and assess their value relevance to firm market values 3 months after the financial statement date. The work helps to identify many issues not apparent from research that focuses only on promulgated accounting standards. Among other things, the research presented in this paper demonstrates that, when reconciling to IFRS or US GAAP, German companies must reverse significant software and film licensing revenue. Other areas of significant difference, not surprisingly, show greater conservatism in reporting under HGB than IFRS or US GAAP, particularly in asset capitalizations and write-offs as well as in accruals of provisions and reserves. The latter category is value relevant to the firms’ market values after controlling for all other categories of reconciling items from HGB to either IFRS or US GAAP, indicating that German markets value these companies’ provisions and accruals under the German reporting system.

Comment on the IASB's Exposure Draft ‘IFRS for Small and Medium-Sized Entities’1

Abstract In February 2007 the IASB invited comments on its Exposure Draft of a proposed IFRS for Small and Medium-Sized Entities. The deadline for comments was 30 November 2007. Below we reproduce3 the comment letter prepared by the European Accounting Associations Financial Reporting Standards Committee (EAA FRSC). This is a follow up of the EAA FRSCs comment letter prepared in response to the IASBs Discussion Paper on ‘Preliminary Views on Accounting Standards for Small and Medium-Sized Entities’, published in 2005. Our comment is structured as follows: we initially sketch the background to the development of the Exposure Draft. We then revisit the key issues arising from our previous comment letter. This is followed by a survey of relevant literature published since the Discussion Paper. We then briefly address the questions raised by the IASB in the context of the Exposure Draft, before summarising the key issues arising from the literature which we consider relevant to the IASBs project.

The Role of Management as a User of Accounting Information: Implications for Standard Setting

The aim of this paper is to analyze the question of whether the sole focus of standard setters developing accounting standards that are useful to external users for making decisions about providing resources to the entity result in useful accounting information. To answer this question, we analyzed the relationship between the stewardship function of financial accounting and the demand for information useful in making economic decisions on resource allocation (decision-making demand; decision-useful information) by external investors. We first analyse information within an efficiency-based framework of financial economics abstracting from agency conflicts. We demonstrate that decisions on resource allocation not only require forward-looking, but also backward-looking performance measures which indicate the necessity as well as the direction of corrective action. Next, we introduce information asymmetries and incentive problems. In this setting, the stewardship function of accounting gains relevance. External users now need not only information for their investment decisions but also information to use in assessing management performance and to gain insight into how management used the entity’s resources. Since however, managers anticipate the way they are evaluated, any accounting information used to control management has an incentive effect and alters management’s internal decision-making. Therefore, standard setters cannot ignore the incentive effect (stewardship function) of financial accounting information and the consequence it has for decision-making. If standard setters consider decision-usefulness and stewardship as compatible functions of accounting, accounting rules need to serve both functions simultaneously, that is, provide information that is useful for investors for making economic decisions and at the same time provide incentives for managers to act in the owners’ best interests. Or, if in fact the two functions are considered distinct and incompatible, then they must be separated and considered explicitly. That is, managers should then not be held accountable for their actions based on accounting information.

Wertorientierte Steuerungsgrößen im Kontext zunehmender Bedeutung immaterieller Werttreiber in der Unternehmenspraxis

Der vorliegende Beitrag diskutiert die im Zuge der Digitalisierung zunehmende Bedeutung immaterieller Werttreiber fur unternehmerische Wertschopfungsprozesse und analysiert die hieraus resultierenden Konsequenzen fur die Aussagekraft wertorientierter Steuerungsgrosen. Anhand einer empirischen Untersuchung von 160 im DAX, MDAX, SDAX und TECDAX gelisteten Unternehmen fur die Geschaftsjahre 2005-2016 wird gezeigt, dass mit einer steigenden Markt- Buchwert-Lucke die Aussagekraft wertorientierter Steuerungsgrosen, die auf Bilanzdaten basieren, erheblich beeintrachtigt wird. Die steigende Bedeutung immaterieller Werte und deren unzureichende Abbildung im externen Reporting hat somit unmittelbare Ruckwirkung fur das Unternehmenscontrolling.

The Need to Provide Internationally Comparable Accounting Information and the Application of IFRS: Empirical Evidence from German Private Firms

Abstract Our study, which is based on a survey carried out among German private firms, aims to ascertain which characteristics determine private firms’ need for providing internationally comparable accounting information and whether or not those firms that perceive such a need actually apply IFRS voluntarily. The relevance of equity from foreign investors and inclusion within an international group are positively associated with this perceived need, whereas international operating activities and a firm’s size are not. Regarding the voluntary adoption of IFRS, both the perceived need and also the interaction between size and need are significant. Our results show that smaller firms, despite perceiving a need for providing their stakeholders with internationally comparable accounting information, often do not apply IFRS.

Externe Unternehmensberichterstattung und Vertrauen

Trotz dieser elementaren Bedeutung von Vertrauen – gerade auch in der externen Unternehmensberichterstattung, wo es immer auch um Glaubwurdigkeit von Informationen geht – hat sich die Rechnungslegungsliteratur mit dieser Thematik wissenschaftlich bislang kaum auseinandergesetzt. Die Begriffe „Vertrauen“ bzw. „Zuruckgewinnung von Vertrauen von Investoren bzw. in Kapitalmarkte“ tauchen im Laufe der Jahrzehnte immer wieder als Schlagworte in Gesetzesbegrundungen auf; es trat mit der Zeit jedoch eine gewisse Gewohnung ein, Rechnungslegung unter dem Aspekt angeschlagener Vertrauensverhaltnisse zu betrachten.