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The Handelsgesetzbuch (HGB), also known as the German Commercial Code, is the primary source of German commercial law. The Commercial Code sets out how businesses must keep records and how financial statements must be prepared and reported. Additionally, the HGB contains prohibitions on certain forms of business activity which are illegal under German law.
The HGB is the most significant piece of legislation governing commercial activity in Germany, and is divided into two parts. The first part, known as the 'book trade provisions', contains rules pertaining to how businesses should offer and keep records on their trade. This includes, but is not limited to, principles for accounting, such as the use of the historical cost basis, and communication with all of the business’ shareholders. The second part of the HGB contains far reaching ordinances on corporate governance, e.g. corporate directors, auditing, and corporate reorganisation.
The HGB is based on a historical cost basis, and is generally more conservative than International Financial Reporting Standards (IFRS). Generally speaking, IFRS allows for revaluations when the appropriate conditions are met, but the HGB does not. The HGB does, however, allow the recognition of specific one-off items, and provides a limited scope of provisions for small entities. Thus, property, plant, and equipment are not always subject to an impairment review, as is required by IFRS.
The HGB is also applicable to individual companies as a whole. The Commercial Code elaborates on numerous corporate ordinances related to labour law, the liability of corporate directors, data protection, mergers, and the organisation of works councils, amongst others.
In summary, the Handelsgesetzbuch (HGB) is a significant piece of legislation governing business activity in Germany, setting out rules and regulations related to the preparation and reporting of financial statements, labour law, corporate governance, and more. It is generally more conservative than IFRS, but also provides a limited scope of provisions for small entities. Overall, the Commercial Code has been instrumental in creating a reliable regulatory framework for commercial activities in Germany.
The HGB is the most significant piece of legislation governing commercial activity in Germany, and is divided into two parts. The first part, known as the 'book trade provisions', contains rules pertaining to how businesses should offer and keep records on their trade. This includes, but is not limited to, principles for accounting, such as the use of the historical cost basis, and communication with all of the business’ shareholders. The second part of the HGB contains far reaching ordinances on corporate governance, e.g. corporate directors, auditing, and corporate reorganisation.
The HGB is based on a historical cost basis, and is generally more conservative than International Financial Reporting Standards (IFRS). Generally speaking, IFRS allows for revaluations when the appropriate conditions are met, but the HGB does not. The HGB does, however, allow the recognition of specific one-off items, and provides a limited scope of provisions for small entities. Thus, property, plant, and equipment are not always subject to an impairment review, as is required by IFRS.
The HGB is also applicable to individual companies as a whole. The Commercial Code elaborates on numerous corporate ordinances related to labour law, the liability of corporate directors, data protection, mergers, and the organisation of works councils, amongst others.
In summary, the Handelsgesetzbuch (HGB) is a significant piece of legislation governing business activity in Germany, setting out rules and regulations related to the preparation and reporting of financial statements, labour law, corporate governance, and more. It is generally more conservative than IFRS, but also provides a limited scope of provisions for small entities. Overall, the Commercial Code has been instrumental in creating a reliable regulatory framework for commercial activities in Germany.