This essay will compare and contrast the accounting systems of Germany and the
United States of Amerika. First the single systems, their core concepts and purposes
will be introduced. Second, the two core concepts of conservatism and true and vair
value will be presented. Both systems will be examined in order to show how they
incorporate these concepts and how this might affect the calculation of profits. Where
data is available, selected examples from published company accounts will be
shown. Finally some short comments on how the systems come closer to each other
since several german companies aim for crosslistings in both countries. A conclusion
will summarize the main facts. Different accounting systems might come to different results in their calculations of
profits. This can be shown by drawing an example from the Siemens AG’s annual
report 2000. In their report based on German GAAP (General Accepted Accounting
Principles) the net income in 2000 was 7,901 million €. The same calculation based
on U.S. GAAP amounts in the F-20 report for the Securities and Exchange
Commission (SEC) to 8,860 million € (see figure 1). Now the Question is how come
this difference of nearly 14%? Is one system more exact? [...] As we have seen in assignment 1, accounting is not a science. It has been
developed to serve a purpose. Accounting systems are influenced by several social
and economic factors (Radebaugh and Gray, 1997). [...] It seems that German GAAP and US GAAP have different objectives. Therefore we
will analyze the two systems in their national contexts now.
Table of Contents
- Introduction
- A comparison: HGB and USGAAP
- Accounting in Germany
- Accounting in the United States of America
- The 'overriding' principle
Objectives and Key Themes
The objective of this essay is to compare and contrast the accounting systems of Germany and the United States, focusing on their core concepts, purposes, and how they incorporate the concepts of conservatism and true and fair value. The essay aims to demonstrate how these differences can affect profit calculations using examples from published company accounts. It also briefly considers the increasing convergence of these systems due to cross-listings.
- Comparison of German (HGB) and US (US GAAP) accounting systems
- Analysis of the concept of conservatism in both systems
- Examination of the "true and fair view" concept in both systems
- Impact of accounting system differences on profit calculations
- Convergence of German and US accounting practices
Chapter Summaries
Introduction: This essay sets out to compare and contrast the accounting systems of Germany and the United States. It will examine the core concepts and purposes of each system, focusing on the principles of conservatism and true and fair value, and their impact on profit calculation. The essay will use examples from published company accounts, particularly those of Siemens AG, to illustrate the differences. Finally, it will briefly discuss the growing convergence of the two systems due to increased cross-listings between German and US companies.
A comparison: HGB and USGAAP: This chapter uses the Siemens AG 2000 annual report to highlight the discrepancies between German GAAP (HGB) and US GAAP in profit calculations. The report shows a significant difference in net income (approximately 14%) calculated using the two systems. This difference stems from the underlying objectives and influences on each system, which will be explored further in subsequent sections. The chapter establishes that accounting is not a precise science, but rather a practice influenced by various social, economic, and legal factors, as illustrated by a diagram showing influences on accounting systems.
Accounting in Germany: This section delves into the specifics of German accounting practices, emphasizing the priority given to carefully calculated profits and creditor protection. The chapter categorizes the German system as macro-uniform, government-driven, and tax-dominated, citing Nobes's work. The close link between accounting and taxation due to the "Maßgeblichkeitsprinzip" is highlighted, as is the relatively weak equity position due to the bank-related and credit-based financing prevalent in the German financial system.
Keywords
German GAAP (HGB), US GAAP, conservatism, true and fair view, profit calculation, Siemens AG, cross-listings, accounting systems, national context, taxation, financial reporting.
Frequently Asked Questions: A Comparison of German (HGB) and US (US GAAP) Accounting Systems
What is the main objective of this document?
This document provides a comprehensive preview of an essay comparing and contrasting the German (HGB) and US (US GAAP) accounting systems. It includes the table of contents, objectives, key themes, chapter summaries, and keywords.
What are the key themes explored in the essay?
The essay focuses on comparing the core concepts and purposes of German and US accounting systems. It analyzes the principles of conservatism and "true and fair view," examining their impact on profit calculations and illustrating differences using examples from published company accounts, particularly Siemens AG. The increasing convergence of these systems due to cross-listings is also briefly considered.
What specific aspects of the accounting systems are compared?
The comparison includes an analysis of the concept of conservatism in both systems, an examination of the "true and fair view" concept, the impact of accounting system differences on profit calculations, and the convergence of German and US accounting practices. The differences in profit calculations are highlighted using data from Siemens AG's 2000 annual report, showing a significant discrepancy (approximately 14%).
How are the German and US accounting systems characterized?
The German accounting system (HGB) is characterized as macro-uniform, government-driven, and tax-dominated, with a strong emphasis on carefully calculated profits and creditor protection. The close link between accounting and taxation due to the "Maßgeblichkeitsprinzip" is highlighted. The US GAAP system is implicitly contrasted by these characteristics, though not explicitly defined in the same manner.
What role does the "Maßgeblichkeitsprinzip" play in German accounting?
The "Maßgeblichkeitsprinzip" (principle of authority) highlights the close link between accounting and taxation in the German system. This means that the financial statements prepared for tax purposes are also used for financial reporting purposes.
What is the significance of Siemens AG in this analysis?
Siemens AG's 2000 annual report serves as a key example to illustrate the discrepancies between HGB and US GAAP in profit calculations. The significant difference in net income calculated using the two systems highlights the impact of differing accounting principles.
What is the significance of the concept of "true and fair view"?
The "true and fair view" concept is a central element examined in the essay, comparing how this principle is applied and interpreted within the contexts of both HGB and US GAAP, influencing the final reported financial figures.
What is mentioned about the convergence of German and US accounting practices?
The essay briefly touches upon the growing convergence of German and US accounting practices due to increased cross-listings between companies in both countries. This suggests a trend towards harmonization of accounting standards.
What are the key words associated with this essay?
Key words include: German GAAP (HGB), US GAAP, conservatism, true and fair view, profit calculation, Siemens AG, cross-listings, accounting systems, national context, taxation, and financial reporting.
- Quote paper
- Markus Bruetsch (Author), 2003, U.S. GAAP and German HGB - A comparative Approach, Munich, GRIN Verlag, https://www.grin.com/document/14850
