The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Austria and Germany

Abstract

Austria and Germany share similar accounting traditions. International harmonization in both countries has mainly focused on group accounting. In contrast, single financial statements give rise to legal and tax consequences and, thus, are still tied to the traditional principles of orderly accounting. Recent regulatory changes confirmed this dual role of accounting in both countries, while moving local accounting rules closer to IFRS, although to different extents. We illustrate how recent regulations in the two countries made reference to IFRS, how IFRS was considered during the law-making process and outline major differences that remain between domestic and international accounting standards.

Keywords:

• internationalization
• harmonization
• accounting traditions
• contracting
• Germany
• Austria
• IFRS
• EU Accounting Directive 2013/34/EU

JEL Classification:

• M41

Disclosure Statement

No potential conflict of interest was reported by the authors.

ORCID

Marcus Bravidor http://orcid.org/0000-0003-1504-9889

Notes

1 German law permits the preparation of single financial statements according to IFRS only for disclosure purposes in addition to the domestic standards (§ 325 IIa HGB).

2 For parsimony, we refer to companies hereafter.

3 For accounting purposes, partnerships with incorporated companies as fully liable partners only are treated as incorporated companies.

4 We assigned general references to international standards to specific standards in Table 1 where we were able to establish such a link from the context in the document. General references to IFRS that have no (explicit or implicit) link to any specific standard were extremely rare and only pertained to the final laws URÄG 2008 and RÄG 2014 (see Table 1).

5 While the specific reference in the basis for conclusions is to paragraph 30 of the IASB’s conceptual framework and therefore must refer to the former framework from 1989, the way the reference is used rather reflects the definition of materiality provided in the IASB’s revised framework (QC11), published in 2010.

6 The bases for conclusions of the Ministerialentwurf and the Regierungsvorlage of the RÄG 2014 refer to IAS 12.17. However, the topic of offsetting is dealt with in IAS 12.71 ff.

7 The alternative suggestion to use the fiscal discount rate of 3.5% reflects the efforts to align the Austrian corporate code with tax law.

8 Therefore, for example, it is argued in several comment letters not to mandate the capitalization of deferred tax assets in line with IAS 12 but to continue providing an explicit option to preparers to capitalize or not.

9 Two of the references directly refer to IAS 24 and IAS 39. All other references generally refer to ‘international standards'. In these cases, we assigned the reference to a certain standard based on the context. For example, a reference to ‘international standards’ in a paragraph which deals with the accounting for intangible assets would be attributed to IAS 38.

10 Since we use words as unit of analysis (Krippendorf, 2013), our results may overestimate the number of references.

11 Zülch and Hoffmann (2008) provide an overview of the discussion.

12 In the wake of the current low interest environment, the estimation period for pension provisions has been extended to 10 years in 2016. For tax purposes, the interest rate used for discounting remains at 6%.

13 Another example is rate-regulated industries where regulated revenues are measured on the basis of single financial statements (Pierk & Weil, 2016).

14 GAS must be applied in the preparation of consolidated financial statements (§ 342 II HGB).

15 Empirical studies provide evidence that the earnings quality (management) increased (decreased) after BilMoG (Lopatta, Kaspereit, Jaeschke, & Stockem, 2013; Zicke, 2014). Furthermore, comparability of consolidated financial accountants prepared under IFRS and HGB increased (Gross, 2016).

16 Additionally, provisions must be recognized for waste disposal expenses which will be incurred within the upcoming year.