IFRS · HGB Auf Deutsch

IFRS or HGB – which applies when?

Whether a company reports under HGB, under IFRS, or both depends on its legal form, capital-market orientation and group structure. The first distinction to make is between the separate financial statements (of the individual company) and the consolidated financial statements (the combined statements of a group) – different rules apply to each. This overview sorts the main cases.

Separate financial statements: HGB is mandatory

The separate financial statements of every German merchant or corporation must be prepared under HGB. They serve two functions that IFRS do not cover: they are the basis for profit distribution (they determine the profit that may be distributed to shareholders) and, via the authoritative principle (Maßgeblichkeit, § 5(1) EStG), the starting point for the tax accounts. An IFRS statement therefore cannot replace the HGB separate statements in Germany.

Large corporations may additionally publish an IFRS single-entity statement for information purposes in the Federal Gazette (§ 325 (2a) HGB). For distribution and taxation, however, the HGB statements remain authoritative.

Consolidated financial statements: mandatory or optional

For the consolidated financial statements, capital-market orientation is decisive:

  • Capital-market-oriented parents (securities within the meaning of § 264d HGB traded on an organised market) must prepare their consolidated statements under IFRS – as required by the EU IFRS Regulation (Reg. 1606/2002).
  • Non-capital-market-oriented groups have an option: they may prepare the consolidated statements under HGB or voluntarily under IFRS (§ 315e (3) HGB).

Size classes & disclosure

Regardless of the framework, the HGB defines the size class of a corporation (small, medium-sized or large under § 267 HGB, by total assets, revenue and number of employees). This determines the scope of the notes, the management report, the audit requirement and disclosure. The annual accounts must be filed with the Federal Gazette (Bundesanzeiger) (§ 325 HGB); small companies enjoy exemptions.

When IFRS also becomes relevant

  • Subsidiaries that supply an IFRS reporting package to the group, even though their own separate statements remain under HGB.
  • Companies with international investors, banks or parents that expect IFRS figures.
  • A planned IPO or raising capital on an organised market.

In short

Separate statements = HGB as a rule. Consolidated statements = IFRS where capital-market-oriented, otherwise an option. Many German companies therefore effectively run both worlds in parallel: HGB for distribution and tax, IFRS for group and capital-market communication. The exact requirements and thresholds can change – the current versions of the HGB and the relevant EU regulations prevail. The comparison overview shows the concrete differences for each topic, with a worked example.