Convergence of German Accounting Standards with IFRS

The provided document is an assignment on the convergence of German accounting standards with International Financial Reporting Standards (IFRS). The author delves into the process of convergence, its benefits, and limitations. Despite time limitations, the primary data collection method was employed to gain in-depth knowledge. The assignment discusses various studies and research papers related to IFRS adoption and its impact on companies' reporting performance. It also touches upon the search for new phenomena in monophoton final states in proton–proton collisions at s= 8 TeV. Overall, this document provides a comprehensive analysis of the convergence process and its implications for Germany.

Wanda dissertation paraphrasing

Table of Contents
Wanda dissertation paraphrasing.....................................................................................................1
Introduction......................................................................................................................................1
1.1 Introduction...........................................................................................................................1
1.2 Background to study.............................................................................................................1
1.3 Research Goals, Objectives and Questions...........................................................................2
1.4 Study overview......................................................................................................................3
Literature Review.............................................................................................................................4
2.1 Background of International Financial Reporting Standards................................................4
2.2 Key differences.....................................................................................................................5
2.3 IFRS importance in Germany...............................................................................................6
2.4 Preference of IFRS over U.S. GAAP....................................................................................9
Research Design and Methodology...............................................................................................10
3.1 Introduction.........................................................................................................................10
3.3 Aim of research, Research questions and Objectives.........................................................11
3.3 Research Methodology and Design....................................................................................11
3.4 Method of Data Collection and Analysis............................................................................13
3.5 Measurement validity..........................................................................................................13
Result and Analysis........................................................................................................................13
4.1 Key difference between German GAAP and IFRS.............................................................13
4.2 Case Study...........................................................................................................................22
REFERENCES..............................................................................................................................34

Introduction
1.1 Introduction
IFRS (International Financial Reporting Standard) main objective is determining or
formulating of standards for accounting which involves developing a one high-quality,
understandable and enforceable standards for accounting throughout the world. IFRS is been
supported by the International Monetary Fund (IMF), International Federation of Accountants
(IFAC) Basel Committee, The European Parliament, the Council of European Union and
International Organisation of Securities Commission (Elbakry and et.al., 2017). To undertake
mission for enhancing financial data comparison, consistency, applicability, evaluation of
financial instruments and its global recognition and for constant measurement, IFRS is been
governed by the International Accounting Standards Board (IASB) (Cordazzo, 2014).
International Financial Reporting Standards are accounting standards which are been issued by
IFRS Foundation and the International Accounting Standards Board (IASB) for having a
common language throughout the world for business affairs so as to make it understandable and
easy to compare company's account across global boundaries. It is been implemented for
harmonizing accounting across European Union (EU).
Generally Accepted Accounting Principles (GAAP) is now globally replaced by International
Financial Reporting Standards (IFRS). Choice of adopting IFRS were given to members of
European Economic Association (EEA) and members of European Union (EU) were required to
publicly listed companies to implement IFRS. US GAAP has been practised by United States,
while, since 2007 IFRS based financial statements were permitted to international firms which
trade in capital market by U.S. Securities and Exchange Commission (SEC) (Ball, Li and
Shivakumar, 2015).
Convergence of German GAAP (Generally Accepted Accounting Practices) to IFRS will be
studied in this research.
1.2 Background to study
From 14th century accounting practices are rooted back in German history. In the history
of German accounting first businessman to record his business transaction was Hermann
Wittenberg in 1329, which was followed by his son Johann till 1360. The transaction recorded
was based on single entry, unsystematic and have a likeness of a notebook (Garefalakis and
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et.al., 2016). Double-entry system was adopted by Fugger in 16th century which was already in
practice at business centre in Northern and central Italy. In 20th centuries, over a decade
accounting standards in Germany have faced many changes (Ahmed, 2015).
German GAAP, IFRS and U.S. GAAP are permitted in reporting by
Bilanzrechtsmodernisierungsgesetz (German: Accounting Law Reform Act), in early 2000.
Table was turned down due to year 2002 financial crisis. Because of financial crisis, U.S. GAAP
was decided to used by Germany, after that only IFRS was declared mandatory for members of
Europe Union in the year 2005. Till present day from then IFRS is not fully adopted by
Germany, there are still difference in number of standards. Mainly IAS 2, IAS 16, IAS 17 and
FRS 19 are particularly concentrated in this research (Khachatryan and et.al., 2016).
1.3 Research Goals, Objectives and Questions
The main objectives or goal of this research is to study Germany GAAP and IFRS with
reference to number of standards that are noted in studies background. Case study method is
been used for to achieve the goals of this study. Financial year ended 2015 and 2016 transaction
were taken for deploy the standards. With the help of translation tables and ratio analysis results
for the data are been generated.
In order to achieve our goals and objectives the researcher concentrate on the followings;
 Background of international financial reporting standards
 Alternative accounting standards
 Introduction of international accounting standards in Germany
 Distinguish the key differences in accounting standards
 Analyse the impact on financial statement (ratio analysis and translation tables)
Further, to enhancement of above research goals, the research question were raised as follows:
 What are the key differences between German GAAP and IFRS?
 What is the importance of this convergence?
 Why IFRS accounting standards not U.S. GAAP?
 What are the impacts on the financial statements over this convergence?
 Does the final result justifiable?
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1.4 Study overview
Literature review will be discussed on the next section (i.e., 2), this section contains
previously conducted research on focus of German GAAP and IFRA is been analysed. To
investigate the research aims, research objectives and answer for research questions (1-5)
mentioned above (Section 1.3) are the main focus of this literature review. Research design and
methodology (Section 3), is the observational part of the paper which depicts the information and
procedure applied in this study. In Literature review background of International Financial
Reporting Standards are been discussed and it origin etc. are studied. The key or mail differences
between International financial reporting standards (IFRS) and the German Generally Accepted
Accounting Principles (GAAP) is done to compare the both accounting standards. Importance of
IFRS in perspective of Germany is been determined and studied and the preference of
International Financial Reporting Standards (IFRS) over the US Generally Accepted Accounting
Principles are determined. In research methodology the main aim for conducting this research
project is been determined, objectives and questions for the research are considered and drafted.
Research design and the method of conducting the research is been determined and the method
for collecting the data is selected and then the collected data is been analysed for its reliability
and accuracy. In measurement validity the data collected is considered for its reliability for this
collecting data from reliable sources are retained. Then the collected data is been converted into
understandable results and is been analysed. From the research by comparing both international
financial reporting standards (IFRS) and German Generally accepted accounting principles
(GAAP) differences are been obtained. By using Case study method as secondary data source
used to study and compare the applicability of both IFRS and German GAAP. The data or
financial statements taken is created and taken from samples of different researchers, as actual
data from actual entity would be very difficult to understand and analyse. Impact of first
adoption of IFRS on an entity's performance and financial position is determined by this research
project. For analysing the results for the application of IFRS ratio analysis is been used to
calculate the financial statements or reports.
On this particular research case study method is been used. As per IFRS and German GAAP
standards the accounting transaction for 2 years are created and financial statements are being
recorded. The deviation were translated and adjusted after the initial recognition are been done.
Difference between the two standards are being analysed in the followed section 4 through using
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ratio analysis. Conclusions and limitation of the research and study and answers for the final
questions are displayed in section 5. Lastly academic references and source of this studies are
been mentioned in section 6.
Literature Review
2.1 Background of International Financial Reporting Standards
International Accounting Standards Committe (IASC) and International Accounting
Standards Board (IASB) together with International Accounting Standards (IAS) issued or
launched International Financial Reporting Standards (IFRS) (Zhang and et.al., 2017). IASB is a
self regulating body, located in London and was founded in 1973. To set up principle based
standards and developing various accounting measures or standards, IASB is commited to
resemble firms financial enactment and position. To act in public interest, to apply a single set of
comprehensible, excellence and enforceable global accounting standards which enforce
transparency and competent to compare accounting transactions globally is the main objective of
IASB. The main elements for measuring the financial statements for financial position of an
entity are assets, liabilities and Equity. Assets are resources that are been controlled and
monitored by an entity as a past event's result and from which it is believed that future economic
profits would flow to the entity. Liabilities are current responsibility of an entity that have arised
from events of the past and results in outflow from entity from resources or assets expected at
settlement of them. Equity is the residual interest that are from nominal assets after deducting all
liabilities of the entity (Kouki, 2018).
Adoption of IFRS as a reporting standards was allowed and suggested by the International
Organisation of Securities Commissions (IOSC) to international companies which are listed in
stock exchange in the year 2000. Followed by this, Europe Union parliament in year 2002 passed
mandatory obligation or duty for offering in cross-borders (German accounting And IFRS
limitations, 2017). Consolidated financial statements are to be prepared by the listed companies
that have to adopt IFRS. Financial reporting standards were distinctly adopted by the European
Union and other corporations and led to international comparability due to globalization of IFRS
(German IFRS, 2017).
Literature review has been broken down or divided into sub topics: Preference IFRS over U.S
GAAP, review the key differences between IFRS and German GAAP, and importance of IFRS.
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Each sub sections are enriched with trusted sources like journals, review from peers, relationship
of cross border, articles, global accounting standards are compared. For this study current
accounting standards, cross border relationship, agency view, etc., and other aspects are been
highlighted from the view of agency (Elbakry and et.al., 2017). Key or main points are been
highlighted and compiled after each sections are been discussed. It is believed that a base could
be set for further analysis from the collected facts and data.
2.2 Key differences
From the section above it is mentioned, to determine the main differences in accounting
treatments between German GAAP and IFRS, is one the key objectives of this research project.
On the basis of traditional requirement of HGB Germany have always made their accounting
policies based on this. IFRS model is been inspired by the Anglo – Saxon principles (Cordazzo,
2014). Accounting models in Germany are conservatism based are suggested by difference
between the two i.e., German GAAP and IFRA. Comparison of difference in treatment of
accounting is been evaluated in this section.
Criteria recognition and measurement on the basis of Assets and Liabilities
 Under German GAAP, internally generated or created intangible assets are not marked
for recognition. Because, internally generated intangible assets are foreseen to provide
continuous ongoing firm services. With condition that assets and profits are generated
and qualified faithfully, the UK IFRS states that internally yielded assets can be
recognised in contrast to German GAAP. While considering development costs, its
proved to be relevant (Ball, Li and Shivakumar, 2015).
 Trading, derivative financial liabilities and assets are not acknowledged in German
GAAP. Whereas, these assets and liabilities are requisite or necessary to be marked in
IFRS accounting statements or reports (Garefalakis and et.al., 2016).
 Under IFRS, in case of impairment losses, the highest number between net realisable
value and the value in use should be considered for recording or measuring financial
statements or report. Whereas, its stated that test of impairment on fixed assets are to be
definite on replacement cost and must be less than value in use, in German GAAP. Due
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to lack of methodology for computing or determining value it is been done (Ahmed,
2015).
 In order to avoid any acknowledgement of gains in the unsettled balances, foreign
currencies' monetary balances are translated at closing rates, under the standards of the
German GAAP. Whereas in contrast to this, differences in both positive or negative
exchanges are to be recognised within the income statement regardless of settlement in
IFRS accounting standards (Khachatryan and et.al., 2016).
 The German GAAP in respect to the start up costs, amortising and capitalising of these
are been suggested to use. Whereas, UK IFRS doesn't allow or suggest amortisation and
capitalisation, due to unforeseen circumstances (Zhang and et.al., 2017).
 Under the German GAAP, while considering the principles in relation to inventories are
adopted, they are to be valued at net realisable value and at the lowest replacement costs.
Under inventories a portion of administrative costs or overheads can be included, is been
claimed by the German GAAP. However, German GAAP previously doesn't consider the
direct costs. The costs and realisable value are referenced by UK IFRS and the general
manufacturing overheads are always included in the costs (Kouki, 2018).
 Revenue received from construction contracts that are recognised can differ between UK
IFRS and the German GAAP. Completed contract method is been used by the German
GAAP, whereas, the percentage of completion while appreciating revenues that is been
received from construction contracts (German accounting And IFRS limitations, 2017).
 With the help of projected unit credit method, pension provisions are estimated. German
GAAP does not consider future salary or increase in pension of the account and uses tax
determination of interest rates for the companies that uses German GAAP. Losses are
deferred in IFRS whereas, in German GAAP actual losses are identified on immediate
basis (German IFRS, 2017). The recognition criteria for recognising provisions are more confining in IFRS compared
to the principles of German GAAP
2.3 IFRS importance in Germany
In early 14th century German accounting standards were implemented. Hermann
Wittenberg of Lucbeck, a businessman was one of the first individuals to record a business
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transaction (Elbakry and et.al., 2017). In Germany there were a few advancements in the
commercial accounting practice in respect to trading with the expansion of the international
activities at the beginning of the 16th century. By Fuggers of Augsbur, the double-entry system of
accounting was adopted, from 16th century (Cordazzo, 2014).
Over the years German accounting standards have evolved for meeting the firm's stakeholders
requirements. Germany has been criticised for adopting IFRS accounting standards. Previously
Germany have been criticised for its accounting standards for following reasons:
1. Criticised for giving less importance towards shareholders.
2. Minor role of equity capital markets are been criticised.
Importance towards shareholders
Stakeholders of a company such as investors use the financial statements to monitor the firms
financial position in market for taking various decisions before investing in the firm. For
monitoring purposes like to evaluate its commitments of contact, financial statements are used by
investors and other stakeholders. Investors are not given importance in German accounting
standards. Main required information of valuation-orientation for investor's knowledge was
ignored (Ball, Li and Shivakumar, 2015).
Equity capital markets' role
Banking sector is been provided primal importance, as the economy of Germany is been
specifically characterised as bank based. However, equity capital market is ignored by Germany
and for this its been criticised (Garefalakis and et.al., 2016). Capital market activities are facing a
decrease in its function resulted due to, German failed to gain recognition in equity markets as
internal financing and debt are focused more in German economy.
In order to create a push towards international capital markets, it is been debated by German
companies' needs was renounced for adoption of international accounting principles, during late
1980's. This was due to the requirement of relevant and reliable accounting information by the
German companies, causing differences in consistency of German standards and US GAAP
financial reporting (Ahmed, 2015). Pressure on German legislator have increased, as in context
to international community German accounting principles credibility was in danger.
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In order to promote competitiveness on German companies, in 1988 Alleviation law was enacted
as an outcome for this. For preparing financial statements according to the internationally
accepted accounting standards (IAS), German companies must be able to publish themselves on
stock corporations. In accordance to IAS/IFRS consistent financial reports are implemented by
market oriented companies in aim of international convergence (Khachatryan and et.al., 2016).
On a large scale debate on the global adaptation of accounting standards have been conducted
recently.
In various countries there have mixed results regarding to benefits of adoption of IFRS,
according to studies. Standards are not aligned closely considering political and economic
institutions of different countries are one of the main attribute that surrounds this issue (German
IFRS, 2017). Prior to planning of convergence, whether IFRS is suitable for the country's needs
are to be assessed by accounting regulators and international accounting standards setters, as per
Zhang and et.al (2017). In regard of accounting information, it is suggested by Kouki (2018),
that in order to influence the needs of nation there are certain vital factors. The state of capital
market development, strengths of the equity markets, where a system for accounting is
implemented are some factors that could influence the accounting information (German
accounting And IFRS limitations, 2017). Above mentioned issues are eradicated from Germany
after adoption of IFRS.
While comparing the both German standards and International Financial Reporting Standards,
IFRS is less conservative than accounting standards in Germany. To provide reliable information
to stakeholders is the main aim of German standards. More emphasis is been given on reliability
of information than communicating the information. As per Elbakry (2017), regarding the first
issue in case of Germany, IFRS standards would be beneficial for them as its focus is on
informing the stakeholders.
According to Cordazzo (2014), there are some additional benefits to support adoption of IFRS.
The main aim of IFRS is to keep shareholders informed all times and for creating financial
informational decisions, have influence on investors by adopting IFRS. While analysing different
nations, confusion regarding measuring and analysing financial performance would be reduced.
Adoption of IFRS on capital market and information quality indicates the effects through most
studies, considering demolition of latter issue. Including various countries around the world,
sample size of equity capital market is ample. Positive advantages of IFRS have been indicated
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by the results of the studies, while discussing the role of equity market. According to Ball, Li and
Shivakumar (2015), positive advantage is depended on characteristics of countries. Samples
from EU countries are been taken for comparing the findings for adoption of IFRS standards
which resulted in non favourable findings, while analyzing samples from different countries
throughout the world.
According to Garefalakis (2016) there are further benefits of implementing IFRS are, that
according to varied sets of standards for preparing financial statements would lead to reduction
of cost spent. Its been argued that in international investments, adoption of IFRS would lead to
increase in incentives. Increase in market value of financial statements has been proved after the
adoption of IFRS from some studies, relevance to the consolidated information of financial
reporting regarding IFRS transition. While, from some other studies, it also been derived that it
would not lead to rise in market value.
It proves to be beneficial for investors and enhances reporting quality by using the International
Financial Reporting Standards (IFRS), is stated by supporters of IFRS. However, non suitability
of IFRS for all types of setting are argued by the opponents (German IFRS, 2017).
Lastly, through adoption of IFRS, financial resources would be allocated more efficiently
worldwide. Economic gains and losses of countries are reflected using IFRS appropriately on
timely basis. The results measured are more informative and reduces discretions from traditional
system of accounting existed in EU and provides benefits from better accounting information to
the countries. IFRS proves to be more beneficial, based on fiscal and political issues, while
comparing traditional accounting systems with IFRS (German accounting And IFRS limitations,
2017).
2.4 Preference of IFRS over U.S. GAAP
From 2005, firms and companies in Germany following German GAAP and U.S. GAAP
have to switch over to IFRS. According to Ahmed (2015), firms in European Union has limited
for mandatory adopt IFRS due to improvements in liquidity in market. Different methods to
compare US GAAP and IFRS and examining factors for increasing comparability after adoption
of IFRS. In order to compare the effect of US GAAP and IFRS, firms in Germany have been
chosen for taking sample size.
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Increase in comparability have benefited the nation after switching from traditional accounting
standards to IFRS, determined from studies of recent years. Risk is generated in cross country
comparability through adopting IFRS by Germany, which can be measured by similarities in
accounting functions. According to Khachatryan (2016) adoption of IFRS by foreign firms
increased the comparability between foreign firms and UK firms.
Immediate recognition of loss, is one of the advantages of adopting IFRS in Germany, if benefits
of using IFRS compared to US GAAP is evaluated. For investors, lenders and for other
stakeholders for German companies its proved to be fruitful for them. Corporate governance in
Germany is been improved by adopting IFRS, as it increases the efficiency of contracting
between companies. For acknowledge the losses on immediate basis, increase in transparency act
as an advantage of using IFRS. When companies faces economic losses, this loss of recognition
by educating investors and on this issue, can benefit potential investors and stakeholders of the
companies. It is been proved that adopting IFRS in Germany can act as a great benefit to
investors. For understanding the financial statements and adjusting the costs spend, investors in
German markets are required under IFRS, standardise and harmonize the financial reporting
standards (Kouki, 2018).
Through this, fees for processing the financial statements by analyst is been eliminated. While
considering the national standards, better relevance, better accuracy and comprehensive financial
information are determined compared to IFRS and US GAAP. According to Zhang (2017)
adapting IFRS helps in reducing the risks for new investors in the market and helps new
investors understand the financial statements easily. After switching to IFRS, comparability
increases by a low pace. After adopting IFRS, possibility exists there that comparability may not
increase, after considering all supporting arguments that have been given above in favour of
implementation of IFRS over US GAAP.
Research Design and Methodology
3.1 Introduction
To determine the difference between International Financial Reporting Standards and
German Generally Accepted Accounting Principles (German GAAP) are the main purpose of
this project research. Critical evaluation is been provided in previous chapter i.e., Literature
Review that govern this project main research questions. Impact of adoption of IFRS in Germany
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is been examined in this research project. For showing difference between IFRS and German
GAAP, real two years practical examples of data is been taken in this research project. Main
difference in the rules for reporting by making statements, standards and translation table are
been highlighted and identified with the help of practical examples. Afterwards, analysis of
results is done through, two method of ratio analysis, that are profitability and efficiency ratios.
3.3 Aim of research, Research questions and Objectives
The key objectives of this research project are been listed below: Introduction of International Accounting Standards of Germany International Financial Reporting Standards' background Key differences in accounting standards Accounting standards alternative Analysing impact on financial statement (translation tables and ratio analysis)
Research questions were raised for further improvement in the above research goals are as
follows:
i. State the importance of this convergence?
ii. Key difference between IFRS and German GAAP?
iii. How IFRS accounting standards differ from US GAAP?
iv. Impacts of convergence on financial statements?
v. Is the final result justifiable?
3.3 Research Methodology and Design
In a research project the most important part is of research methodology. Methodology
used in this project would be mainly based on the technique of secondary collection of data.
While using a suitable method for research methodology, decisions should be made carefully, in
order to complete any research project. Prior to these studies, information is been collected
through secondary data. According to Cordazzo (2014), secondary data is been developed using
statistical processes and also could be found in sort of literature studies. Secondary data in the
form of case study method is been used for conducting this study.
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Analysing the data precisely and in a specific context, case study method is been used to
guide the researcher. To investigate the real life process on the perspective of a specific practical
context is the main aim of case study method, its also defined as an inquiry. Case study method
proves to be suitable, in situations of non evident of phenomenon and the boundaries between
context is not available. In-depth analysis of a single case are also examined through some case
studies. Analysis of results can be derived and also provides systematic approach to evaluate
collected data and benefits over a specific period or duration of time (Ball, Li and Shivakumar,
2015). Phenomenon that may occur naturally and are present in a particular collection of data,
case study method helps researcher with the advantage of careful observation. Examination of
data is conducted within the context of its use, is one of the greater benefits of using case study
method for research.
To compare different form of techniques of secondary data, case study method is been
chosen to consider this research project. For achieving the research aim of this research project
better help would be taken by using case study method. The practical difference between UK
IFRS and German GAAP along with the discussion of the consequences of relating a pair of
financial statements prepared are taken with the help of case study method in relevance to IFRS
in comparison to German GAAP. Case study method proves to be the most appropriate, for
understanding a concerned problem deeply.
The figures taken in the financial statements prepared in this research project is been
created instead of taking it from real one. As, financial data extracted from real world companies
could be a complex process and hard to understand. Complete set of financial statement are
included in this research project in accordance to the principles drafted in IFRS and the German
GAAP. Deep importance is been given to comparability, while looking at a set of financial
statements are suggested by IFRS. It is a time consuming process of decision making as it allows
for further analysis of the financial statements. In order to determine the financial performance of
the company and also its financial position in market it is been done.
Financial statements of two different accounting standards, IFRS and German GAAP are
been differentiated and addressed and been highlighted in this research project. Implications of
main difference on the perspective of various stakeholders are been further evaluated in this
project. For comparing both sets of financial statements, ratio analysis is been used in this
project. Profitability, efficiency and investment ratios are been used in this project for
12

determining the financial ratios (Garefalakis and et.al., 2016). An in-depth analysis of financial
performance of the firms by engaging the difference of IFRS and German GAAP in this research
project.
3.4 Method of Data Collection and Analysis
For the purpose of this study secondary data is been collected in this research, as
mentioned in previous section. Using the techniques of secondary data collection in specific case
study method, helps to analyse the research project the best. Secondary data used in this project
are taken from trust worthy online sources, such as published reports of world known accounting
firms like KPMG, IASPLUS.COM and PWC regarding the data collection. Sources obtained
from peer-reviewed articles from different journals, website of university, books and journals
from library, and using scholarly articles available on Google Scholar for collecting data for
research project for adding further support.
Using scratch of the researcher who compared between IFRS and German GAAP, a pair
of financial statements have been created for achieving the objectives of this research project.
For findings in this research project and for further benefit, financial ratio analysis is also been
included in this. By providing an enhanced and critical understanding of this convergence it
would benefit to the project.
3.5 Measurement validity
Although the information or data is created, necessary steps are taken to avoid any
irregularities, during the extracting results and transacting from worksheet. In research project,
measurement validation is a very important process. Retaining reliable sources mentioned in
above data this can be achieved.
Result and Analysis
4.1 Key difference between German GAAP and IFRS
Area IFRS German GAAP
Adopting first time IFRS adoption: Lack specific guidance for
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- International Financial Reporting
Standards are effective at
reporting date from its date of first
adoption by an entity.
- Its retrospective method which
means that it is been based upon
traditional methods.
- for first time adoption exception
can be given in International
Financial Reporting Standards,
adjustment against goodwill or
other assets on while preparing
financial statements.
knowing the first time adoption of
German GAAP
There are less or unavailability of
information to know about the first
time application of German
GAAP.
Basis for
measurement
International Financial Reporting
standards follows historical cost as
a basis for measurement, certain
exceptions can be given allowing
fair value method for certain
assets.
German Generally Accepted
Accounting Principles follows
historic cost strictly as the
measurement basis, except for
specific industries, revaluation
needed
Override fair
presentation
After disclosing the reasons and
impact, can depart in case if
company or entity believes that
compliance to IFRS standard is
misleading and are not reliable
and the set criteria are not met.
The entity need to disclose it (in
unique case) in the notes in
accounting statement, if current
standards of German Generally
Accepted Accounting Principles is
misleading and doesn't meet the
criteria for the standards.
Financial statements
components
Complete set of financial
statements and notes to the
account are required in IFRS. In
case of any reclassifications or if
For consolidated and public listed
companies, IFRS and additional
segmented report are been
followed.
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retrospective method is applied,
additional notes are needed.
If major changes or reclassification
is done management report is
required.
Cash flow statement –
format and method
Cash flow statements in IFRS
standards is been divided into
financing, operating and investing
activities.
It provides option to choose
indirect or direct method.
It is not mandatory for all entity
for prepare, but required by big
organisation to prepare according
to German GAAP.
Cash and cash
equivalent definition
Followings are included in cash
equivalent:
 Investment of maturity of
less than 3 months from
date of acquire can be
included in cash and cash
equivalent.
 Bank, petty cash and fixed
deposits are also been
included in Cash and cash
equivalent.
 Instead of cash equivalent,
short term loans are
included in financing cash
flow.
 Bank Overdraft also comes
under Cash and cash
equivalent in IFRS
standards.
In German GAAP, As cash
equivalent, only first grade liquid
cash are been treated.
 In cash fund, Bank
overdraft which are
repayable at anytime can be
included in it.
 Short term borrowings are
not listed or stated in cash
funds.
 Investment follows IFRS.
Correction of errors  Material adjustments of
prior year, restated and
 In rare situations amounts
in notes are required to be
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retrospectively in IFRS
standards.
 Balance sheet items are
affected that are attached
with current year
statements prior to
adjustment of errors of
comparative year.
included in it necessarily,
to state the nature of
adjustment in accordance
with German Generally
Accepted Accounting
Principles.
 Adjustments of prior year
material are stated in profit
and loss statement of
current year.
Initial measurement –
Plant, property and
equipment (PPE).
Acquisition cost or direct cost
related to assembling and
transportation cost and cost price
are included in initial cost.
Cost to produce or acquisition cost
or cost price are used for
measuring the initial cost in
German GAAP.
Subsequent
measurement - Plant,
property and
equipment (PPE).
Revaluation model or cost model
are the options in IFRS to choose
from. For all PPE same method
should be followed by an entity.
Increases are to be directly
credited to revaluation surplus,
except the same asset has been
charged in profit and loss while
using the revaluation method.
Revaluation surplus account is
reverse against for same assets and
for charging profit and loss for
any excess left, if there is any
decrease in revaluation.
Cost model is only allowed in
German GAAP. Certain are
reported at fair value in case of
special asset that fully or
specifically used for differentiated
long term loan or pension. Since
fair value is practised, there will be
difference in distribution of
dividend, where revaluation is not
allowed. There is no record of
difference between differed tax
cost and fair value less cost.
Significant part of
PPE separate
PPE with various helpful life are
accounted separately and
Except certain situations, its not
necessary for doing separate
16

depreciation individually depreciated. All
related transaction are disposed at
reverse. If criteria is meet, changes
of parts are accounted separately.
Useful life and remaining value of
assets are been required to tested
annually by IFRS.
treatments. In profit and loss
account, disposal of assets to
charge in German GAAP are
related to IFRS. As per IFRS,
changes of parts are done. For
parts special treatments are not
allowed, but allowed in entire.
Cost of Acquisition Acquisition cost and initial cost of
PPE measurement are as below:
 Direct cost related to the
functioning of machine,
which includes cost of
handling and
configuration.
 Purchase cost which
includes, non-reimbursable
tax, Import duties, less any
rebates and discounts.
 Transportation cost that
occurs during bringing the
assets to the site and the
cost on site for set up and
configuration.
 Preliminary costs that have
appeared while assembling
and dissembling PPE on
operational site.
 Cost of labour with
relation to acquiring for
producing and operating
machinery.
Compared to IFRS PPE initial cost
measurement are as follows:
 Cost related to
configuration and handling
as per IFRS are considered
Direct cost.
 Purchase cost (as per
IFRS).
 Transportation and
handling cost of assets for
sit set up are not applicable
in the primary distributable
cost. Primary distributable
cost are:
 It is not required for
preliminary costs of
dissembling and
assembling PPE at
operating sites, but have to
be allowed if is required by
as per any agreement or if
any legal requirement and
should be depreciated and
accounted on the basis of
17

 Cost incurred in hiring any
professional services and
initial cost for PPE's test
run.
straight line till assets are
disposed or de-recognised.
 Cost to bring assets to the
site and transportation.
 On site set up and
configuration cost. Initial
cost for test run PPE and
with relation to acquiring
machine or producing are
not absorbed in Labour
cost.
 Cost incurred in hiring any
of professional services.
Inventories At realisable value and at lower
cost inventories are measured.
 First In First Out (FIFO)
 Prohibiting Last In First
Out method (LIFO).
 For measuring the
inventories cost, weighted
average method is been
adopted.
 If there is any difference in
the inventories book value,
necessary adjustments are
to be done.
 Market value or lower of
cost are only used for
measuring inventories.
 For measuring all operating
expenses, same
measurement is been used,
which includes any special
cost, excluding research
and selling expenses.
 For including other costs in
capitalisation there are
options available.
 Under certain
circumstances, the entity
can choose from constant
value method, weighted
average, Last In First Out
method and First In and
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First Out method.
Investment property As per IFRS definition of
investment property such as land,
building, etc., on which rental
income is been received by entity
or been held for appreciation,
including a property that is being
developed on basis of future
benefits and property which is
been in construction. Trading of
property as owner occupied
property or as a main principle
activities are not included.
Assessment of property can be
done on the basis of fair value or
historical cost basis by the entity.
Amortisation is not allowed and
gains and losses are to be
accounted in profit and loss
statement, when the fair value
method is been used. In certain
circumstances entity is allowed to
choose cost model, in case where
fair value model is not that much
effective, in situations where
property is under construction or
development till the date of
accomplishment or whenever
reliable measures can be taken, or
whichever comes first.
Under German GAAP, there are no
special treatment of property (Land
and building) they are all treated as
PPE and is been measured as
follows:
 Amortisation would take
place and application of
cost model is been done by
an entity.
 Initial cost is been
measured at cost of
conversion or acquisition
cost while PPE (Plant,
Property and Equipment)
are bought.
 Fair value model and
revaluation are not allowed
in German GAAP as
compare to International
Financial Reporting
Standards.
19

Finance leases –
Lessor accounting
As receivables, finance lease
payments are recognized in IFRS.
As per net investment method,
earnings are been monitored on
the basis of recording of gross
receivables from lessee. Lessee
owned finance lease amount are
treated in receivables and are
included in net investment account
which is sum of minimum lease
payment of future less future gross
earning.
Gross earning is divided between
lease income and principal
payment for getting uniform
income. Over the lease period, the
direct attributable cost is been
depreciated.
Between the lessor and lessee, the
lease is usually been divided in
German Generally Accepted
Accounting Standards (GAAP).
Lease portion of principal payment
and difference by end of lease
terms in future value are
recognised, in case of attributable.
Lessee only pays rental if the asset
is not attributable and there would
be difference in future value at the
end of lease term. In principal
amount and interest payments, the
receivables from lessee are divided
into.
Transactions of sales
and leaseback
Before accounting for any gains or
losses, finance lease back or
operating lease and whether lower
or above than fair value is been
distinguished in sale of lease back
transaction.
As per International Financial
Reporting Standards, sales and
lease back transactions are being
recognised, but only after
recognising the hand over process
gains and losses are been
recognised and hence transfer of
title is crucial.
Finance lease back Over the lease term any profits or
losses on lease back financial
transactions are depreciated and
deferred.
Over the lease term profit on sale
is amortised and is treated as per
International Financial Reporting
Standards (IFRS). Sale instantly is
20

required in German Generally
Accepted Accounting Standards
(GAAP).
Lessee have to capitalize the assets
and then the payments are
recorded in as liabilities and
depreciate it over the lease period.
Operating lease back Under International Financial
Reporting Standards surplus are
deferred over its useful life, when
the selling price is higher than its
fair value.
It is considered as loan and is been
deferred and amortised over the
lease period, when the surplus
arise from deviation between
selling price over the fair value.
Financial assets Financial assets are been defined
under International Financial
Reporting Standards (IFRS) are as
follows:
 Other parties equity tools
 Binding legal document
(contract) that are related
to financial assets of entity
and the derivatives are not
included in this.
 Cash
 Any kind of financial
assets that are exchanged
for any product rendered
and of services or any
document that binds to
give rights to accept cash.
Financial assets defined by
German Generally Accepted
Accounting Principles (GAAP)
are:
 Normal trading activities
define financial instruments
contract.
 Through equity instrument
liabilities and other party as
assets are recorded through
equity instruments.
 It is firms obligation to
categorise derivatives also
under financial instruments
but under balance sheet it is
not recorded.
 Due to timing difference,
firm failed to act promptly,
21

defines the rise of financial
assets of firm, as per
contract an obligation of an
entity.
Tax rate reconciliation To explain the relation between
trading profit or loss and tax, it is
required to formulate and working
paper by International Financial
Reporting Standards (IFRS).
Difference between appropriate
tax rate and current tax rate or
between estimated tax and actual
tax is formulae for reconciliation.
It is necessary to attach formulae
of computation of tax.
It doesn't require any particular
reconciliation of tax rate and any
working of deferred tax is
acceptable, under German
Generally Accepted Accounting
Principles (GAAP).
4.2 Case Study
On 1st January 2015, the business entity was incorporated. Capital brought in by the
business owner was ₤300,000 in cash and issued 300,000 ordinary share capital. Worth of paid
up capital is of ₤1 per share.
Followings are Germany's accounting treatments:
1) Measurement of initial cost of machinery like removing, disassembly, restoring and also
the staff benefits that occurs from construction. Site preparation are excluded from the
measurement of initial cost.
2) Measurement of inventories included in cost of sold goods with the use of Last in First
Out (LIFO) method.
3) Under German Generally Accepted Accounting Principles (GAAP) financing leases are
classified as operating lease. In income statements lease payments are been treated as
lease expenses.
22

Following are the transactions that have taken place:
 Machine worth ₤10,000 was brought by the entity on 1st January 2015 on the day of
commencement. At the rate of 20% per annum and on zero useful life the machine is
depreciated by using straight line method. Machine initial cost of set up on the site
including removing, dismantling and restoring or assembling was ₤4,000 and ₤1,000 was
amounted as staff benefit includes wages and allowances during site preparation.
 On 1st January 2015 on date of incorporation entity has entered into contract of four year
leases of machinery for cost of ₤55,000. On 1 January 2015 payment of initial deposit of
₤13,190 was made followed by payment of ₤13,190 in four annual payment or
instalments. 7 years is the economic useful life. Residual value is of ₤6,000 and on
straight line method the depreciation is been charged monthly. 100% of the cost price is
been represented by lease payment and includes 10% per annum of implicit rate. In
German GAAP under lease expenses this payment has been treated.
 Under German Generally Accepted Accounting Principles (GAAP) for stock valuation of
the entity LIFO (Last In First Out) method is been applied. Under cost of goods sold,
purchases and stock are classified. Followings are the details of purchases and stock:
Unit Price/Unit Total (₤)
Purchases 500 20 10000
Purchases 400 25 10000
Unit LIFO
Price/unit
FIFO
Price/unit
LIFO
Total (₤)
FIFO
Total (₤)
Closing stock 200 25 30 5000 6000
 Following are total cash sales:
Unit Price/unit Total sales
Sales 1200 50 60000
 Wages and salary paid were amounted ₤8,810.
23

 Germany's assumed tax rate is 25%.
 During the year there are no asset impairment.
24

25

4.4 The impact of the first adoption of IFRS on the entity’s financial position and performance
Notes:
1. In the German GAAP there are no particular guidelines to treat the lease, generally
almost all the leases are considered as operating lease rather than financial lease. As per
the IFRS 17, the initial period for assets purchased is measured when they are purchased.
The assets and liability under financial lease shall be recorded at fair and current value of
the minimum lease payments in the lease by the lessee (allocation, if possible is done
among long term and current liability and incremental and implicit rate). For highlighting
the obligations the financial cost will be charges expense from the lease payments.(IAS
17.20). this note denotes the assets (Elbakry and et.al., 2017). Current and non current
liabilities and prepayment reversal related to financial lease.
2. Under the German GAAP all the costs and benefits are disregarded. The cost is initial
cost which is related to dismantling, removing and resorting and the benefits are related
to staff arising from construction and site preparation. Initial cost incurred is recognised
as assets at first, the cost is related to measurement of property, plant and machinery (IAS
16). As per the German CAAP, in Note 2 capitalisation of initial cost of machinery is
done as it is charged as an expense.
3. The initial measurement of PPE. Inventories and financial lease which required an
adjustment in the deferred tax is carried out in Note 3. there is a change in overall tax
calculations which have a direct impact on financial statement during the transactional
process.
4. The measurement of inventories is carries out as per IAS 2, the measure are FIFO, LIFO,
weighted average method and at lower cost (Cordazzo, 2014). Under IFRS FIFO metod
is strictly prohibited and in this note inventories are measured from FIFO and LIFO
method.
5. Note 5 denotes the flow of calculations as 1. initial recognition of lease, 2 machinary
recognition, 4. inventory measurement, which directs to 3. deferred tax adjustment in the
opening financial statement

Closing Statement of Financial Position at December, 31st, 2016 – reconciliation
Notes:
1. As per IAS 1 outstanding liabilities are recognised between current and non current
liabilities of financial lease in the financial statement as on 31st December 2016
adjustment related to retain earnings, deferred tax calculation, provision of depreciation,
and reverse of prepayment is carried out which effects the corporate tax of the entity.
2. In the Note 2 adjustment from current year's profit is done for reversal of initial cost of
machinery and provision of the depreciation at the end of year (Ball, Li and Shivakumar,
2015). The adjustment is carries out as per IFRS as German GAAP do not consider initial
measurements.
3. As per the requirement of IFRS, inventories are adjusted with inventory measurement
method and difference of £1500 between LIFO (£7500)and FIFO(£9000) method is
adjusted.
4. An adjustment in machinery(£1000) and inventories (£1500) and apportionment of
liabilities of lease required an adjustment in deferred tax of £2345. adjustment affected
the corporation tac to the extent of £1752.
5. the financial performance of reconciliation in Note 5 present the adjustment details.
Financial performance – reconciliation
Notes:
1. With the application of LIFO method as per German GAAP which is in contradiction of
IFRS, cost of goods sold amounted to £500 in adjustment note 1. As per IFRS closing
inventories are measures by FIFO method.
2. In adjustment note 2, lease expense of £13190 are charges against lease liabilities and
£3280 lease interest and £7000 depreciation are adjusted in income statement as expense.
On outstanding lease liability there is a 10% interest charge.
3. In note 3, adjustment for depreciation of machinery of £1000 which is charged to
income statement as an expense is done. Same effected the cost of machinery and profit
for the year. This fact is neglected in German GAAP.
4. It can be agreed that convergence is a cost. The corporation tax of the entity is effected
by all the adjustment during the transactional period.
27

Analysis of various ratios:
The most common tool for financial analysis is ratios. The casual relationship between
two variable is defined by a ratio. Dependency of ratios defines their effectiveness and aim to be
achieved. With the completion of transitional process ratios are calculated to present the financial
outcomes. In the present study two financial ratios i.e. profitability and efficiency ratios are
applied. Profitability ratios are calculated to present the stage wise effect on the financial
statement. All the relevant elements are considered such as assets, earnings, capital and
investments. The short term effectiveness of the entity is measured through the calculation of
efficiency ratio.
Analysis of financial ratio:
Profitability ratios analysis
Analysis of business earning over the expenses is analysed through profitably ratio. In an
entity they are applied over a financial period. This is a tool which provide information about
the performance of the entity and is tool for comparison of the performance.
Gross profit margin: This is the formula which analyses the financial condition of the
entity. This is calculated as (revenue – cost of goods sold). This is a method which evaluated
the direct cost impact percentage on business activity and is a part of projection tool of the entity.
In the present case study the variation on gross profit margin was 2% in 2015 and 3% in 2016.
The variation is due to adoption of LIFO method as per German GAAP and FIFO method as per
IFRS for valuation of stock. The value difference was £5000 in 2015 and £500 in 2016. here the
variation is not material although it can have significant effect on financial position if it was
material.
Net profit margin: a measure significant for stakeholders. The final figures are the one
which attracts everyone. This is the clean profit after deduction of all the operating expenses and
tax (Garefalakis and et.al., 2016). This formula derives the profit margin percentage of the
business after subtraction of total expenses that often resembles as a reserve in SOFP. The
variance in the analysis tables is 9% in 2015, amounting £8761 and 1% in 2016 amounting
£2410.The difference is due to the valuation method of the stock i.e. LIFO and FIFO method.
Another reason for this is treating financial lease as operating lease, initial cost is not considered
in depreciation method and this also pushed corporation tax to different bracket.
28

Return on capital employed:this ratio reflects the amount of capital distributed in a
financial year. The calculation for this can be done as [EBIT- COGS- operating
expenses(excluding interest and tax)]. For the present case study the ratio was 2% in 2105 and
1% in 2016. Although the difference is not material but it can effect the business in long term.
This calculation is significant of large corporation and businesses such as financial institutions,
multimedia and any other business which requires high liquidity.
Return on equity: the percentage of earning for shareholder on the investment is
reflected by this ratio. This gives a picture of distribution of capital overs a financial period to the
shareholders. The difference of the ratio was 1% in 2015 and 0% in 2016. here the difference is
insignificant but there is a variation in tax payment which is 1.4 % in 2015 and 1.6 % in 2016.
Interest coverage: this ratio calculates the increase in the debt and is important in this
case of lease. The standard ratio is considered as 1.5 % and business can meet its goals with it.
The ratio of the firm are 3.8% in 2015 and 7.4 5 in 2016 which is more than 1.5%.
Debt equity ratio: this ratio measures the obligations of the entity with total value of its
equity compared with percentage of debt consumed in operations. The ratio analysis for 2015 is
not significant and for year 2016 it is -8%. this shows there is a significant rise in the debt as a
result of increase in net profit that contributes equity of shareholders and recognition of lease
assets and their amortization, computation of deferred tax and determination stock measurement
methods that have pushed the bracket higher at financial year end.
Efficiency ratio analysis
These ratios measure the performance of entity on a short term basis. The efficiency
ratios are applicable over short term assets ans liabilities which resembles overall operations of
the company (Ahmed, 2015). These ratios measure the efficiency of the business in generating
the income with available resources.
Working capital ratio: it is calculated as current assets/current liabilities, which reflects
the ability of entity to pay out its shot term liabilities with available immediate resources. The
standard ratios is considered between 1.2 to 2.0, which shows firm have sufficient resources to
meet its current obligation. For the present case study ratios was 52.44 in 2015 and 21% in 2016.
the major difference was because of recognition of financial lease assets over the long term and
current liabilities.
29

Asset turnover ratio: the assets procured by firm through its sales revenues is defined in
this ratio in percentage form. It was -1% in 2015 and -4% in 2016, the difference was due to use
of different stock valuation method and recognition of financial lease assets and reclassification
of operating lease assets in financial lease.
Total asset turnover ratio: the ability of firm to generate sales from its assets by
comparing net sales with average total assets. Higher ratio means entity is generating more
revenue per euro. For 2015 it was 3% and in 2016 it was 0%. the fall down was due to lease
asset and machine cost recognition and stock valuation methods.
Inventory turnover ratio: number of times, inventories sold during a given period. In
the present case study ratio was 5% in 2015 and 6% in 2016, which reflect the performance in
2016 was better than 2015.
Day's sales inventory ratio: it measures how many times an entity sold its total average
inventory amount during a given period. It was 12.175 in 2015 and 31.6% in 2016, the reason for
difference is methods of valuation of opening and closing stock.
Investment ratio analysis:
Earning per share ratio:this is a ratio which allocates the after tax profits among
shareholders. Difference in per share price was £0.02 in 2015 before convergence and in 2016 it
was £(0.06).
Price earning ratio: this is related with earning per share. The difference for year 2015
was 0 and for 2016 it was -3.59 which shows that price earning shown earlier is lower.
5.0 Conclusion and recommendations
5.1 Literature review
This study is carried out with a purpose of analysing the German GAAP convergence
towards IFRS. The research starts with putting down the aim, objectives and questions of
research (Khachatryan and et.al., 2016). In the list 3 questions are answered in this section and
rest are answered in next section. Below are the questions raised on the basis of background
studies carried out on literature reviews:
Define the key differences between German GAAP and IFRS?
IFRS are based on principle case while Germany is based on Anglo-American base or
general rule base. The accounting treatment differences are recognition of internal goodwill,
impairment, derivatives and currency translation. On the basis present transitional result,
30

different accounting standard usage have created a room for misleading information. For the
present case study the difference is not significant. For the organisation which deals in lease and
finance can have material impact because of asset capitalisation expenses which can affect
performance of the business.
Explain the importance related to present convergence?
In the literature review analysis two factors related to German GAAP practice were
highlighted. GAAP practices bank based accounting giving priority to financial institutions
rather than non financial organisations. The relevant information were not disclosed in financial
presentation to stakeholders (Zhang and et.al., 2017) (Kouki, 2018). This resulted in significant
fall in capital market. This convergence process might cover the gap between managers and
stakeholders. In the present case study before and after convergence the net earnings, asset and
liabilities are reflecting some differences, and this percentage can increase when the entity owns
a hight number of financial lease assets. Implementation of IFRS is beneficial.
Why US GAAP is less preferred over IFRS?
With the compulsory adoption of IFRS in EU continent in 2005, draws the attention of
whole world. This contributed in simple comparability, transparency and easy cross border
transactions. It was estimated that globally 100 countries need authorised IFRS reporting.
According to ICAEW, 85 of those countries require IFRS reporting for local and publicly listed
company. All members stats of EU were required to use IFRS for listed company with making of
it mandatory in EU in 2005. US is also adopting IFRS. For example, immediate recognition of
operating loss resembling the real time performance of business. Real time recognition of
information is useful for stakeholders. Overall performance and financial activities get as ease as
compared to US GAAP which recognise losses later. Let us assume that company under this case
study suffered losses in 2015, US GAAP will record higher profits as compared to IFRS and will
lead company to cash floe shortage and insolvency when such losses are recognises.
5.2 Key findings
What is the impact of this convergence over the financial statement?
The present case study presents mixes results. At some point the difference was material
and significant, also a single set of set is not enough to measure complete Germany.
Case study related key findings:
For year ended 31st December 2015
31

On 1st January 2015, a machinery of £10000 was bough by the entity, the cost of initial
set uo including dismantling, removing ans resorting cost to £4000. the wages and allowance as
staff benefits and site preparation amounted to £1000. under the German GAAP site preparation
cost is ignored. For machinery there was a difference of £4000 in the closing statement after
depreciation expenses. Reason for the difference was recognition of initial asset under IFRS and
German GAAP. German GAAP adopted FIFO and IFRS adopted LIFO method for stock
measurement which gave a difference of £1000 in closing inventories. With the recognition of
initial lease assets a major impact on financial statement was seen. The difference in cost can be
bifurcated as cost at net book value £48000, depreciation £7000, lease interest £4181 and
prepaid instalment adjustment was £13190. the reason for such difference was due to treatment
of financial lease assets at operating lease in German books. The total net adjustment was £7009
which pushed up the corporation tax by £1752.
For year ended 31st December 2016
For the year 2016 company neither acquired additional assets and disposed any and there
was no borrowings either. There was an inventory difference of £500 [opening inventory+
COGS-Closing inventory]. The stock for Germany was measured through LIFO method.
Adjustment for machinery was for £1000 in retained earnings (German IFRS, 2017). Lease asset
adjustment at net book value costs to £41000, depreciation was £7000, lease interest was £3280
and prepaid instalment adjustment was of £13190. the total net adjustment was for £2410 which
pushed up corporation tax by £602.
Germany is free to chose from various methods of stock measurement which are FIFO,
weighted average or constant value method from which difference can be eliminated. The reason
for treatment of lease assets under operating lease is that from capitalisation the lessor gets
benefits. From the convergence the difference can be eliminated. The temporary difference of
deferred tax dues will be eliminated in the future.
5.3 Recommendations
As for the first time convergence, it shall be given more focus on the areas like, different
types of industries, size of the firm, nature ans structure of business, profitability rather on a
single set of data. For getting an actual picture real time and primary data shall be collected
rather than relying on secondary data. For interpretation of final results different set of ratio
analysis would be beneficial. The process of convergence can be neglecting but it will be
32

beneficial in future as standard has been proved and chosen be over 100 countries around the
globe.
5.4 Limitations
Insufficient availability of resources, specially in German, which includes reliable
sources such as previewed journals, text and articles. Although, there are various sources
available online the author faces language problem (German accounting And IFRS limitations,
2017). For gaining in depth knowledge of convergence one should spent sufficient time for
translation, significantly for data collection process. The primary data collect method is more
reliable than secondary data collection method. The primary data collection is impossible due to
time limitation and author agrees with the same. With becoming of this mandatory Germany was
left with no option.
33

REFERENCES
Books and Journals
Ahmed, I. E., 2015. Liquidity, Profitability and the Dividends Payout Policy. World Review of
Business Research. 5(2). pp.73-85.
Ball, R., Li, X. and Shivakumar, L., 2015. Contractibility and transparency of financial statement
information prepared under IFRS: Evidence from debt contracts around IFRS
adoption. Journal of Accounting Research. 53(5). pp.915-963.
Cordazzo, M., 2014. Transition to IFRS in Germany and Italy: impact on companies’ reporting
performance. International Journal of Accounting and Finance, 4(4), pp.323-340.
Elbakry, A. E and et.al., 2017. Comparative evidence on the value relevance of IFRS-based
accounting information in Germany and the UK. Journal of International Accounting,
Auditing and Taxation. 28. pp.10-30.
Garefalakis, A and et.al., 2016. Determinants of profitability in aviation industry of Europe and
America. International Journal of Supply Chain Management. 5(2). pp.131-137.
Khachatryan, V and et.al., 2016. Search for new phenomena in monophoton final states in
proton–proton collisions at s= 8 TeV. Physics letters B. 755. pp.102-124.
Kouki, A., 2018. Mandatory IFRS adoption, investor protection and earnings management: A
data analysis of Germany, France and Belgium listed companies. International Journal of
Accounting & Information Management. 26(1). pp.187-204.
Zhang, S and et.al., 2017. Key prescriptive parameters analysis of the new china building energy
code based on saving to investment ratio methodology. Indoor and Built
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Online
German accounting And IFRS limitations. 2017. [Online]. Available through:
<https://link.springer.com/chapter/10.1007/978-3-319-28225-1_19>.
German IFRS. 2017. [Online]. Available through:
<https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/
germany/>.
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