Germany's Current Standards and Practices in Accounting
German Accounting
Introduction
We are on the precipice of a fundamental globalisation step. The important and continued globalisation of investment has led to the development of internationally applicable standards and codes of practice. The international demand for standardised regulatory systems and processes has many benefits; however countries have been largely unwilling to adopt the international standards and codes for various reasons. (Mansfield, 2004) This report will focus on Germany and its current rate of adoption of the international accounting practices, whilst observing their history and cultural influences that have impacted on their current practices today. We have chosen Volkswagen to demonstrate Germany’s current standards and practice.
A history of German accounting
The Franciscan monk Luca Pacioli (1445 - 1514) published the first book on double entry bookkeeping (DEB) in 1494. (Derks, 2008, p. 205). German economic historian Werner Sombart (1863 - 1941) said that DEB was ‘one of the most beautiful discoveries of the human spirit’ (Funnell, 2001, p. 55).
German accounting has been dominated by a series of competing theories of accounting. (Kupper, 2005, p. 346) The French Ordonnance de Commerce of 1673 and the 1807 Code de Commerce can be regarded as the roots of accounting principles and regulations in Germany. The first General German Commercial Code, enacted in 1861, has much in common in terms of accounting with its French counterpart. The predominant purpose of accounting in the early days was to show the wealth of an entity, primarily to enable creditors to evaluate their risks. The principle of creditor protection has been the central concern of accounting in Germany. Because of this, financial reporting in Germany has always been focused on the complete presentation of all assets and liabilities making the balance sheet the predominant financial statement. In Germany, the definition of income is not revenues minus expenses,
Introduction
We are on the precipice of a fundamental globalisation step. The important and continued globalisation of investment has led to the development of internationally applicable standards and codes of practice. The international demand for standardised regulatory systems and processes has many benefits; however countries have been largely unwilling to adopt the international standards and codes for various reasons. (Mansfield, 2004) This report will focus on Germany and its current rate of adoption of the international accounting practices, whilst observing their history and cultural influences that have impacted on their current practices today. We have chosen Volkswagen to demonstrate Germany’s current standards and practice.
A history of German accounting
The Franciscan monk Luca Pacioli (1445 - 1514) published the first book on double entry bookkeeping (DEB) in 1494. (Derks, 2008, p. 205). German economic historian Werner Sombart (1863 - 1941) said that DEB was ‘one of the most beautiful discoveries of the human spirit’ (Funnell, 2001, p. 55).
German accounting has been dominated by a series of competing theories of accounting. (Kupper, 2005, p. 346) The French Ordonnance de Commerce of 1673 and the 1807 Code de Commerce can be regarded as the roots of accounting principles and regulations in Germany. The first General German Commercial Code, enacted in 1861, has much in common in terms of accounting with its French counterpart. The predominant purpose of accounting in the early days was to show the wealth of an entity, primarily to enable creditors to evaluate their risks. The principle of creditor protection has been the central concern of accounting in Germany. Because of this, financial reporting in Germany has always been focused on the complete presentation of all assets and liabilities making the balance sheet the predominant financial statement. In Germany, the definition of income is not revenues minus expenses,