Presentation of Financial Statements
Treatment under IFRS
A set of IFRS financial statements comprises: a balance sheet, a statement of comprehensive income (profit or loss + OCI), a statement of changes in equity, a statement of cash flows and the notes. There is no rigidly prescribed format, but minimum disclosures apply.
- Required components: balance sheet, profit or loss + OCI, statement of changes in equity, statement of cash flows and notes.
- OCI (other comprehensive income): equity changes recognised outside profit or loss (e.g. revaluations, currency translation).
- Option: present comprehensive income in a single statement or in two (profit or loss and OCI separately).
- Minimum line items in the balance sheet; additional items may be added.
- A going-concern assessment is mandatory.
Treatment under German GAAP (HGB)
The annual financial statements (§ 242 HGB) comprise a balance sheet and an income statement; for corporations these are supplemented by the notes and (where applicable) a management report. There is no OCI concept and no mandatory statement of changes in equity in the separate financial statements.
- § 243 HGB: prepared in accordance with the German principles of orderly accounting (GoB).
- § 264 (1) HGB: corporations: balance sheet + income statement + notes + (where applicable) management report.
- § 266 HGB: a prescribed balance-sheet format (account form).
- § 275 HGB: a prescribed income-statement format (nature-of-expense or cost-of-sales method, in vertical form).
Key differences
- No OCI concept under HGB; all income effects flow through profit or loss.
- No mandatory statement of changes in equity in the HGB separate financial statements.
- A statement of cash flows is required in the separate financial statements only for capital-market-oriented entities; in the consolidated accounts it is mandatory.
- Rigid formats (§ 266, § 275 HGB) vs. the flexible IFRS minimum framework.
- The management report is a separate mandatory instrument under HGB; IFRS has no direct equivalent.
Example
Worked example
Note: In keeping with the topic, this comparison sets out the components and key concepts of financial-statement presentation without journal entries. Scope: IFRS financial statements vs the HGB annual financial statements of a corporation. Assumptions for the worked figures (Step 3): net income €1,000,000, revaluation of property, plant and equipment +€300,000 (in OCI under IFRS), actuarial losses €50,000. All amounts in euros.
Step 1 – Components of the financial statements
| Component | IFRS | HGB (corporation) |
|---|---|---|
| Balance sheet | required | required (§ 266) |
| Income statement | required | required (§ 275) |
| Other comprehensive income (OCI) | required | — |
| Statement of changes in equity | required | group only / voluntary |
| Statement of cash flows | required | listed companies / group only |
| Notes | required | required (§ 284 ff.) |
| Management report | no direct equivalent | required (§ 289) |
Step 2 – Format and key concepts
| Feature | IFRS | HGB |
|---|---|---|
| Format | minimum line items, flexible | rigid (§ 266, § 275) |
| Income-statement format | by nature or by function | total-cost or cost-of-sales, vertical |
| Changes recognised outside profit or loss | in OCI | no OCI – partly in P&L, partly not recognised |
| Going-concern assessment | explicit requirement | going-concern assumption (§ 252 (1) no. 2) |
Step 3 – Example: total comprehensive income
The key difference is OCI. For illustration, with net income of €1,000,000, a revaluation of property, plant and equipment of +€300,000 and actuarial losses of −€50,000:
| Item | IFRS | HGB |
|---|---|---|
| Net income | 1,000,000 | 1,000,000 |
| OCI: revaluation of property, plant and equipment | 300,000 | — |
| OCI: actuarial losses | −50,000 | in P&L |
| Total comprehensive income | 1,250,000 | no such concept |
Revaluation of property, plant and equipment is not permitted under HGB (historical-cost principle), so it does not appear at all; actuarial effects are recognised by HGB fully in profit or loss rather than in OCI. HGB has no notion of "total comprehensive income" as the sum of profit and OCI.
Key takeaway
Presentation differs mainly in scope and concept: IFRS requires more components (OCI, statement of changes in equity, statement of cash flows) and uses a flexible minimum framework, whereas HGB prescribes rigid formats (§ 266, § 275) and has no OCI. Changes recognised outside profit or loss that increase total comprehensive income under IFRS are, under HGB, either taken to profit or loss or – like a revaluation – not recognised at all.