Financial Issues in Germany due to Convergence of Accounting Policies

This article discusses the financial issues faced by Germany due to the convergence of accounting policies. It analyzes whether Germany is able to fulfill the objectives of IASB and the issues faced by Germany due to the convergence of accounting policies.

Running head: FINANCIAL ISSUES
Financial Issues
Name of the Student
Name of the University
Author Note

1
FINANCIAL ISSUES
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Whether German is being able to fulfil the IASB objectives......................................................2
Issues faced by Germany due to the Convergence of the Accounting policies...........................3
Conclusion.......................................................................................................................................4
References........................................................................................................................................4

2
FINANCIAL ISSUES
Introduction
The IASB stands for International accounting standard board is an independent body that
sets standards for the International financial reporting standards (IFRS). It was founded on first
of April 2001 to promote and provide applications for the standards for reporting. The primary
objective of the body is to set the standards of accounting for systematic presentation of the
company books (Li et al.2017). The issue has taken place at present that the Germany is facing
due to the convergence of the accounting policies worldwide.
Discussion
Whether German is being able to fulfil the IASB objectives
After analyzing the information from the case study of Germany contextual issues of
convergence of International Financial Reporting Standards accounting (Hellmann, Perera and
Patel 2010), I can say that the objectives of IASB in this case, is not achieved. The accountants
of Germany face problem in the interpretation and the application of the reporting standards, as
in most of cases they lack in knowledge (Eierle et al.2018). The main issue according to me is
the standards set by the IASB are complex and it needs specified knowledge to understand them.
Moreover the rules and regulations in Germany are determined by the EU legislation, the
standards set by the IASB are not consistent.
Then comes the issue of expense, many individuals in Germany consider as being too
expensive to implement especially for the small and medium sized companies. They also think
the standard set by the IASB are irrelevant as it can be interpreted in number of ways
(Christensen et al.2015). Facilitation of convergence and application of IFRS in the Germany

3
FINANCIAL ISSUES
needs translation from English to German. There is lack in the supply of adequate number of
qualified and trained accountant to implement the standards set by the IASB. According to me,
the objective of IASB to provide the standards of accounting are not fulfilled (Wang 2014). The
German in order to raise funds internationally must overcome the issues mentioned.
Issues faced by Germany due to the Convergence of the Accounting policies.
Due to the convergence of the accounting policies, the Germany is facing trouble in
adapting IFRS policies set by the IASB. According to meet the list of the issues faced by them
are as follows:
Cost of implementation of the IFRS policies: The cost of adapting the policies of IFRS is high
for the small and middle- sized firm. The companies are struggling for this burden of staffing and
training the employees to understand the policies.
Lack of education assistance and training: The most of the cases in the research it has been
found that the German firm needs proper knowledge and skilful employees to understand and
implement the IFRS policies.
 Lobbying of activities: The individuals and the groups creates lobby against the efforts
of IASB to require IFRS for the financial statements.
 Translation of the policies: The most if the policies of the IFRS are in English, they are
needed to be translated in German in order to make it understandable.
 Interpretation problems: The principle nature of IFRS is interpreted differently in
different countries. Due to lack of understanding, the account may falsely misinterpret the
policy leading to inaccuracy.

4
FINANCIAL ISSUES
Conclusion
The German legislation incorporated the need for adopting the IFRs into the German law.
This lead to a major problem for the accounting first to adopt the new change in policies set up
by the IASB. In order to flourish in the international market, the Germany needs to overcome
these potential issues.

5
FINANCIAL ISSUES
References
Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What
determines accounting quality changes around IFRS adoption?. European Accounting
Review, 24(1), pp.31-61.
Eierle, B., Shirkhani, D. and Helduser, C., 2018. The Need to Provide Internationally
Comparable Accounting Information and the Application of IFRS: Empirical Evidence from
German Private Firms. Accounting in Europe, pp.1-24.
Hellmann, A., Perera, H. and Patel, C. 2010. Contextual issues of the convergence of
International Financial Reporting Standards: The case of Germany. Advances in Accounting,
incorporating Advances in International Accounting, 26(1), pp. 108 – 116.
Li, S., Sougiannis, T. and Wang, I., 2017. Mandatory IFRS Adoption and the Usefulness of
Accounting Information in Predicting Future Earnings and Cash Flows.
Wang, C., 2014. Accounting standards harmonization and financial statement comparability:
Evidence from transnational information transfer. Journal of Accounting Research, 52(4),
pp.955-992.