Contextual Issues of IFRS Convergence for Germany Analysis

This paper analyzes Germany's adoption of IFRS, highlighting the challenges arising from its distinct accounting environment compared to Anglo-American models. It explores how contextual factors like political, social, and economic environments influence the convergence process. The research involves analyzing the German accounting standards and interviewing stakeholders, auditors, and members of the German Accounting Standards Board (GASB). Key issues include the need to translate IFRS into German, the historical reliance on bank financing rather than capital markets, and the differences in professional accountant certification. The study also addresses the impact of Germany's code law tradition and the emphasis on uniformity over flexibility in accounting standards, contrasting these with Anglo-American practices. The paper concludes by noting potential discrepancies between EU-IFRS and IASB standards due to the endorsement process.

Running head: Contextual issues of the convergence of IFRS for Germany
Contextual issues of the convergence of IFRS for Germany
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1Contextual issues of the convergence of IFRS for Germany
Summary
The objective of this paper is to analysis how Germany is adopting the IFRS as levied
by IASB. Many developing countries like Germany, France and Italy as well as
underdeveloped countries like Egypt, Bangladesh and Bolivia are required to follow IFRS to
be used as the their standard reporting for finances. The issues are that IFRS is applied
inconsistently across many countries having accounting environment different from that of
Anglo-American countries. Germany is always followed the continental European accounting
model which is different from that of Anglo-American model of accounting. This paper
analysis systematic approach towards the Germany’s accounting standards. The potential
issue that is faced by the convergence in Germany and raise the issues related to the adoption
of IFRS. This is also done by interviewing the stakeholders, professional auditors, and
persons those who are affiliated to German Accounting Standards Board (GASB). The
contextual factors like country’s political, social, economic environmental are also influenced
by the process of convergence. The purpose of the paper is to research and develop a research
methodology to understand the effect on the environmental factors that are influenced by the
accounting standards that focuses on the importance of the perpetual non cultural factors.
Analysis of the article:
The organizational environment of Germany is affected by the accounting of HGB.
The German language has been used to write the financial statement and financial terms. But
the interviewees points out that the EU regulations needs to be translate IFRS into 23 official
languages so that the accounting concepst and technical terms included in IFRS can be used
in German accounting. The IFRS was developed with a focus on information required by the
investors.

2Contextual issues of the convergence of IFRS for Germany
The German companies has been obtaining the financial help from the banking
system and the retained earnings as a source of finance. They follow credit insider system
where there is no external or internal pressure to publish detailed financial information. This
is due to the governmental structure followed in Germany where the capital market does not
need the information or transparency in the finances of the company. Having low listed
companies there was no need for publishing a detailed information.
The professional accountants needs to be certified in the case of IFRS. The financial
statement are audited by the affiliated accountants in IFRS where as in Germany the financial
statements are prepared by the accountants who may or may not have membership of
professional association. The profession of tax advisor is important for Germany as there are
only 71000 of the Tax advisors register.
The individual environment affecting the financial statement are affected by the code
law tradition that in the German government to create and enforce financial reporting
practices. Commercial Law enforce by the federal ministry of justice has accounting
regulation on which the stake holders can express views and opinions.
The purpose of giving information for decision making is not very prevalent for the
individual in German and the information are only used for calculating the dividend and
taxable incomes according to German financial system. Thus according to the IFRS the
comments and recommendation are very influential. Thus a financial statement preparer will
face problem to prove that the financial statement are following the comments while
preparation.
The Germans valued uniformity and statuary control instead of flexibility for the
application of the accounting standards according to Handelsgesetzbuch (HGB). The Anglo
American accounting practices in IFRS is very controversial in Germany. As the number of

3Contextual issues of the convergence of IFRS for Germany
companies listed in Germany is very less compared to other American countries. Thus the
issue of consistency is also prevailing as the majority of the company is still preparing the
accounts by nonaffiliated accountants. The endorsement process will be creating EU-IFRS
which may be different from the IASB standards.