On 18 June 2015, the Bundestag passed the so-called Accounting Directive Implementation Act (BilRUG), as amended by the Legal Affairs Committee (BT-Drucks. 18/5256). The Act will come into force upon its publication in the Federal Law Gazette.

Background: On 26 June 2013, the European Parliament and the Council adopted Directive 2013/34/EU (the „Accounting Directive“ or „Annual Accounts Directive“). EU Member States are required to transpose the new Directive into national law by 20 July 2015. The aim of the EU Accounting Directive is to reduce the administrative burden on small and medium-sized enterprises in the EU.

One law – many changes

The Act contains the following key amendments to the accounting provisions of the German Commercial Code (HGB) in order to implement the requirements of Directive 2013/34/EU, including, amongst others,.

  • Increase in the thresholds for the classification of small, medium-sized and large companies, as well as medium-sized and large groups
  • Reduction in the information required in the notes to the accounts, particularly for small limited companies
  • Relaxations of the rules regarding the exemption of subsidiaries, partnerships and parent companies from accounting requirements
  • Distribution restriction on investment income not yet received

The amendments to the Government’s draft bill mainly concern the provisions exempting subsidiaries, commercial partnerships and parent companies from accounting requirements. Explanatory notes have been added regarding the distribution ban on investment income not yet received, as provided for in the government’s draft, with a view to ensuring that profits are recognised in the same period. Furthermore, the transitional provision in the Act Implementing the Commercial Code, the Disclosure Act and the Acts Implementing the Stock Corporation Act and the Act on Limited Liability Companies provides for the removal of the option for companies to apply all new provisions ahead of schedule.

When does the BilRUG come into force?

The Act is to be applied for the first time to financial years beginning after 31 December 2015. Where the financial year coincides with the calendar year, this corresponds to the balance sheet date of 31 December 2016. Early application to earlier financial years is no longer permitted. However, the transitional provisions relating to the early application of the increased thresholds for small and medium-sized companies and the redefinition of turnover have, in principle, been retained. These may already be applied to financial years beginning after 31 December 2013.

CTA Box E-Balance Sheet

Key points at a glance

The following significant changes have a direct impact on the Electronic balance sheet and therefore require an adjustment to the account allocation in the accounts and consequently to the Mapping or a change to the reporting requirements for the components of the report:

  • Extension of the definition of turnover under Section 277(1) of the German Commercial Code (HGB)

In the definition of „sales revenue“, the terms „ordinary course of business“ and „typical“, which were previously included in the definition, have been removed. Consequently, in future, revenue will be recognised as sales revenue – and no longer as other operating income – regardless of whether it arises from ordinary business activities or the typical range of services offered. However, as before, gains on the disposal of fixed assets are not included in sales revenue.

The changes also have implications for the cost-of-sales method, as well as for the notes to the financial statements in accordance with section 285(4) of the German Commercial Code (HGB) and segment reporting in accordance with DRS 3. The classification of the report components therefore needs to be revised.

  • No extraordinary profit or loss is recognised Section 277(4) of the German Commercial Code (HGB), old version.

As the legal definition no longer applies, extraordinary expenses and income are no longer shown separately in the profit and loss account, and consequently, extraordinary profit or loss is no longer reported. The expenses and income previously recognised under this heading are to be recognised in future under the respective item-specific or transaction-related headings.
Section 285(31) of the German Commercial Code (HGB), as amended, now requires disclosures in the notes at the level of individual income statement items. In future, these must be listed in the notes by type and amount, but no longer require specific explanation (Section 275 and Section 285(31) HGB). This does not apply to credit institutions and insurance companies under Section 340a of the German Commercial Code (HGB) in conjunction with the specific accounting regulations applicable to these companies.

  • Changes to the reporting requirements in the notes.

Certain disclosure requirements have been removed, whilst others have been expanded in scope or new ones introduced. In future, the individual items in the balance sheet and profit and loss account must be presented in the order in which they appear. Small companies will benefit from further simplifications. Medium-sized and large companies, on the other hand, will be required to provide more information in future. It is expected that the tax authorities will respond to the changes by adjusting the taxonomies.