Divergent forces that have affected Germany's accounting environment

University: Business Studies

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During the following 25 years, West Germany, with the assistance of capital injections from the US became one of the most prosperous nations. In 1989, the division between West and East Germany was removed and allowed a now united Germany to work towards true unity.

Currently, Germany has a population of over 82 million and a gross domestic product per capita of roughly the same as the UK. The major industries in Germany are motor vehicles, engineering and chemicals with major trading partners consisting of France, Netherlands, Italy, UK and the USA.

German accounting systems reflect the current climate of attempting to unify and strengthen the country. As a result of this, German accounting systems emphasise the income tax and legal requirements. Emphasis has been placed on providing information for creditors and has a conservative balance sheet orientation.

Germany has a small number of listed companies (492 in 1990) compared to the UK (2,101 in 1990) with small and private shareholders playing a relatively small part. Therefor, German accountancy focuses on financial capital maintenance with prudent determination of net worth and profits. Although information is an important purpose of financial statements in Germany the over-riding use and objective is to produce information for creditors.

The German accounting profession is relatively, new small and weak with the government and government ran committees producing most of the rules of accounting and auditing. There is one main professional body in Germany, Institut der Wirtschaftsprufer, founded in 1932 with a size of 6,000, although a second tier body emerged in the late 1980s namely the Vereidigte Buhprufer (sworn book examiners) as the main auditors of private companies Gesselschaft mit beschrankter Haftung (GmbHs).
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