German Group Accounting Guide
German parent companies often ask when they must prepare a consolidated financial statement (“Konzernabschluss”), what it must contain, and how to deal with IFRS vs. HGB and taxes. This guide answers those questions in a practical, investor-friendly way.
Below you’ll find a linked table of contents, a concise explainer of the rules, and an extensive FAQ with 20 common questions and answers.
Who Must Prepare a Consolidated Financial Statement in Germany?
A German parent company must prepare a consolidated financial statement (“Konzernabschluss”) if it controls one or more subsidiaries (control per § 290 HGB). This applies regardless of the legal form or the domicile of the subsidiaries.
Small-group exemptions and higher-level consolidation
There are exemptions: small groups that do not exceed the size thresholds (§ 293 HGB) may be exempt, and a German parent can be exempt if it and its subsidiaries are included in a higher-level consolidated financial statement that is equivalent and publicly available (§§ 291–292 HGB).
Components of the Consolidated Financial Statements
Under § 297 HGB, a Konzernabschluss generally includes a consolidated balance sheet, a consolidated income statement, and notes. In addition, groups prepare a group management report (“Konzernlagebericht,” § 315 HGB).
Group management report (Konzernlagebericht)
The group management report explains business performance, risks and opportunities, forecasts, and key non-financial aspects. Its purpose is to complement the numbers with decision-useful narrative analysis.
Optional statements under HGB/DRS
Depending on size and capital-market orientation, a cash flow statement and a statement of changes in equity can be required or recommended by German Accounting Standards (DRS). Many groups present these statements for transparency and comparability.
Consolidation Scope and Methods
The consolidation scope includes the parent and all controlled subsidiaries, with limited exclusions (e.g., immateriality, disproportionate cost, or severe long-term restrictions under § 296 HGB).
Full consolidation (subsidiaries)
Entities controlled by the parent are fully consolidated: assets, liabilities, income and expenses are combined line-by-line; intra-group balances, transactions and unrealized profits are eliminated.
Proportionate consolidation (joint ventures)
For certain joint ventures, proportionate consolidation can be applied under HGB, recognizing the group’s share of assets, liabilities, income and expenses.
Equity method (associates)
Associates (significant influence) and joint ventures not proportionately consolidated are included using the equity method: the investment is initially recognized at cost and subsequently adjusted for the investor’s share of post-acquisition results and other comprehensive income.
Exclusions from consolidation
Subsidiaries may be excluded in rare cases (e.g., immateriality) but materiality must be assessed at the group level. Long-term severe restrictions on control can also justify exclusion.
Publication and Audit
German consolidated financial statements and the group management report are subject to statutory audit and must be published.
Filing deadlines and Bundesanzeiger
Groups generally file with the Bundesanzeiger within 12 months after year-end; capital-market-oriented companies have shorter deadlines (commonly 4 months). Late or missing filings can trigger fines.
Audit requirements
The Konzernabschluss and Konzernlagebericht require an independent audit under §§ 316–317 HGB. The audit opinion and key audit matters (where applicable) are disclosed with the published statements.
Purpose and Users of the Consolidated Financial Statements
The Konzernabschluss provides a true and fair view of the group’s assets, liabilities, financial position and performance. It enables investors, lenders, employees and other stakeholders to assess profitability, liquidity, capital structure and risk.
“True and fair view” and decision-useful information
Beyond compliance, high-quality group reporting builds trust in governance, supports financing at better terms, and improves decision-making within the group.
HGB vs. IFRS: When to Use Which
Germany allows consolidated financial statements under HGB or IFRS (as adopted by the EU) depending on listing status and policy choice.
Mandatory IFRS for EU-regulated market issuers
Parents whose securities are admitted to trading on an EU-regulated market must prepare consolidated financial statements under IFRS as adopted by the EU (in addition to a group management report under German law).
Voluntary IFRS option under § 315e HGB
Non-listed parents may opt for IFRS consolidated financial statements under § 315e HGB. If they do, IFRS governs recognition and measurement, but German publication and reporting obligations (e.g., Konzernlagebericht) still apply.
Relationship to Tax Law and Presentation of Taxes (HGB)
Commercial (HGB) accounting is separate from tax accounting, but taxes are recognized in the consolidated financial statements.
Current vs. deferred taxes
Tax expense comprises current taxes based on taxable profits of individual entities and deferred taxes for temporary differences between carrying amounts and tax bases, including those arising from consolidation adjustments.
Consolidation-related temporary differences
Purchase price allocation, elimination of intercompany profits in inventories or fixed assets, and fair-value adjustments often create deferred tax assets or liabilities at group level.
Disclosures in the notes
Notes typically include the tax rate(s) applied, a reconciliation from expected to reported tax expense, breakdowns of deferred tax assets and liabilities by source, and information on unrecognized deferred tax assets (e.g., on loss carryforwards).
Frequently asked Questions about German Group Accounting:
ℹ️ Click a question to reveal the answer:
Who is required to prepare a consolidated financial statement in Germany?
A German parent that controls one or more subsidiaries (per § 290 HGB) must prepare a consolidated financial statement unless an exemption (e.g., small-group under § 293 HGB or higher-level consolidation under §§ 291–292 HGB) applies.
What are the core components of a Konzernabschluss under HGB?
Consolidated balance sheet, consolidated income statement, and notes (§ 297 HGB), plus a group management report (§ 315 HGB). Many groups also present a cash flow statement and statement of changes in equity.
How is “control” assessed for consolidation under HGB?
Control generally exists when the parent can determine financial and operating policies of another entity, usually through majority voting rights, agreements, or other means conferring power and returns.
Which consolidation methods are used in Germany?
Full consolidation for subsidiaries; proportionate consolidation (optional) for certain joint ventures; and the equity method for associates and joint ventures not proportionately consolidated.
Can a subsidiary be excluded from consolidation as “immaterial”?
Yes, but materiality is judged at group level. Exclusion is appropriate only if the entity is immaterial in aggregate or consolidation would involve disproportionate cost or there are severe long-term restrictions (§ 296 HGB).
When is IFRS mandatory for German groups?
If the parent’s securities are admitted to trading on an EU-regulated market, consolidated financial statements must be prepared under IFRS as adopted by the EU. The group management report under German law still applies.
May non-listed parents choose IFRS voluntarily (§ 315e HGB)?
Yes. Non-listed parents can opt to prepare IFRS consolidated statements. IFRS then governs recognition and measurement, while German publication and the Konzernlagebericht still apply.
What are the publication deadlines for consolidated statements in Germany?
Generally within 12 months after year-end for non-capital-market-oriented groups; commonly 4 months for capital-market-oriented companies. Filing is with the Bundesanzeiger.
Are German consolidated financial statements audited?
Yes. The Konzernabschluss and Konzernlagebericht are subject to a statutory audit by an independent auditor under §§ 316–317 HGB.
What intra-group eliminations are required on consolidation?
Eliminate intercompany balances, intercompany income/expenses, dividends, and unrealized profits (e.g., on inventory and fixed assets) to present the group as a single economic entity.
How are business combinations treated under HGB consolidation?
At initial consolidation, purchase price allocation is performed: identifiable assets and liabilities are measured at fair values; the difference is recognized as goodwill or negative goodwill, with subsequent treatment per HGB/DRS.
How are non-controlling interests (NCI) presented under HGB?
NCI represent the portion of equity and result not attributable to the parent. They are shown separately in consolidated equity and in the allocation of profit or loss.
How are current and deferred taxes recognized in the Konzernabschluss (HGB)?
Current tax reflects the period’s taxable profits of group entities. Deferred taxes arise on temporary differences between carrying amounts and tax bases, including those created by consolidation adjustments (e.g., PPA, intercompany profit eliminations).
Do HGB groups offset deferred tax assets and liabilities?
HGB permits offsetting of deferred tax assets and liabilities when they relate to the same tax authority and taxable entity (at group level after consolidation), subject to disclosure requirements in the notes.
What must be disclosed about income taxes in HGB consolidated statements?
Typical disclosures include the tax rate(s), a tax reconciliation from expected to reported tax expense, the composition of deferred taxes by source, and information on unrecognized deferred tax assets.
How does the Konzernlagebericht differ from the consolidated financial statements?
The Konzernlagebericht is a narrative report covering performance, risks, opportunities and outlook. It complements, but does not duplicate, the numbers in the consolidated statements.
Are cash flow statements mandatory under HGB for all groups?
Not for all. Requirements depend on size and capital-market status; however, many groups present a cash flow statement under DRS recommendations for transparency.
How do IFRS and HGB differ in consolidation practice at a high level?
IFRS uses a single, principle-based control model and prohibits proportionate consolidation for JVs (uses equity method), with broader fair-value measurement and more extensive disclosures. HGB is more conservative, allows proportionate consolidation in defined cases, and has different measurement/disclosure emphases.
Where are consolidated financial statements published in Germany?
They are filed electronically with the Bundesanzeiger (Federal Gazette). Capital-market-oriented issuers also publish via their investor relations channels in line with capital market rules.
What are common pitfalls when first preparing a Konzernabschluss?
Frequent issues include incomplete consolidation scopes, late or inconsistent intercompany eliminations, insufficient documentation for PPA and judgments, and weak tax reporting (e.g., missing deferred tax analysis). Early planning and robust closing procedures help avoid delays and audit findings.