Insights

Financial Statements in Germany

Business people who are required to keep accounts must prepare annual financial statements as of the balance sheet date at the end of each fiscal year. Small business owners, freelancers and small self-employed persons are not subject to this obligation. They only have to prepare a revenue surplus account, from which the profit achieved is derived.

The accounting department/accountants close all accounts as of the balance sheet date in preparation for the preparation of the annual financial statements. The annual financial statement of a company provides an overall view of all profits and losses of the past fiscal year. The tool of business accounting thus provides information about the financial status of a company.

What belongs to the annual financial statement?

For smaller companies, as long as they are not subject to mandatory accounting, a surplus income statement (Einnahmenüberschussrechnung or EÜR) is sufficient as an annual financial statement.

If the company belongs, for example, to the scale of corporations, it is necessary to prepare at least a balance sheet and a profit and loss statement. This includes:

  • Partnerships (GbR, OHG, KG)
  • Corporations (AG, GmbH, UG)
  • Corporation & Co. (AG & Co. KG, GmbH & Co. KG, UG & Co. KG )

Depending on the type and size, an appendix and a management report may also be necessary.

Function of the annual financial statement

An annual financial statement should inform on the one hand and provide the basis for payments on the other hand. The latter may include taxes, but also shareholdings and dividends. Strategies and consequences for the future can be derived from the information contained in the financial statements.

The duty to prepare financial statements

The basic obligation to prepare annual financial statements, as far as Germany is concerned, is regulated in the German Commercial Code. Other laws also apply. These include the Publicity Act or the Income Tax Act. There are also different regulations that affect certain legal forms and regulations.

International requirements

Companies that operate internationally may have to meet other and/or additional requirements in addition to the German annual financial statements. For example, companies that are also active in the USA and may be listed on the stock exchange must submit financial statements in accordance with US GAAP (United States Generally Accepted Accounting Principles).

In the case of group structures, annual financial statements in accordance with IFRS (International Financial Reporting Standards) are required.