Balancing past and present: The impact of accounting internationalisation on German accounting regulations

Abstract

Accounting plays a distinct role in a firm's governance system and has evolved in a specific institutional setting over time to meet the contractual demands of various stakeholders. Against this backdrop, we argue that accounting internationalisation affects the contracting system when formal rules from other settings are introduced. To support our argument and to substantiate the interplay of accounting as a contractual device and country-specific institutions, we provide an in-depth case study of one European code-law country, Germany. Here, we place the recent phenomenon of accounting internationalisation into historical-institutional perspective and illustrate how accounting internationalisation has triggered a balancing act between a path-dependent preservation of the traditional contracting role and a moderate move towards valuation-based international benchmarks.

Separation – integration – and now …? A historical perspective on the relationship between German management accounting and financial accounting

“…In 1965 the revised Stock Corporations Act ("Aktiengesetz" 1965) was introduced. It aimed to limit a company's ability to build hidden reserves by specifying acceptable reasons for writedowns and restricting the formation of provisions (Fülbier and Klein, 2015). However, the prudence principle of the HGB and its purpose to determine a distributable profit still remained in place as overriding axioms (Eierle, 2005).…”

“…Correspondingly, stakeholders expected managers not to focus solely on shareholders' financial interests but also to consider the interests of various wider groups (van Mourick, 2014). In this socio-economic context financial accounting took on additional roles as an instrument to address and reconcile distributional conflicts between the different interest groups (Glaum, 2000;Fülbier and Klein, 2015). Accordingly, throughout the 20 th century German financial accounting research adopted a normative approach focusing on the improvement of "Bilanztheorien" and the development of accounting-related legal regulations (Perrey et al, 2010).…”

“…Third, the aforementioned segmental reporting according to the management approach emphasizes the importance of consistent figures and ratios that are communicated externally and internally and may serve as coercive pressure. Fourth, a major reform of the HGB, ("Bilanzrechtsmodernisierungsgesetz" (BilMoG, 2009)), was recently enacted with the intention of strengthening the information function of HGB financial statements and implying a comparatively lower emphasis on creditor protection (Wehrheim and Fross, 2010;Heidhues and Patel, 2011;Fülbier and Klein, 2015). For instance, the recognition of provisions has been considerably restricted and allows for less managerial discretion (Baetge et al, 2009;Hellmann et al, 2013).…”

“…It follows the tradition of Previts et al (1990), Levant and Nikitin (2012), Hoffmann and Detzen (2013), and Fülbier and Klein (2015) in making sense of historical processes by reference to a literaturebased narrative. We encompass scholarly as well as German practitioner-oriented journals and also draw on related papers in the 'international' literature.…”

“Forging accounting principles” in France, Germany, Japan, and China: A comparative review

“…While Eierle's (2005) objective was to analyze the evolution of differential reporting requirements for different kinds of firms, she gives an overview of major legal reforms in the process and seems to have been cited much for this particular aspect. More recent overview studies include Ballwieser (2010), Brandau et al (2017), Fülbier and Klein (2015), and Hoffmann and Detzen (2013). These studies form the basis of the following overview, which is split into three episodes on the emergence of the regulatory framework of accounting, the German Commercial Code and accounting principles, and the impact of European harmonization efforts.…”