What are the German accounting standards companies must follow?

In Germany, two main accounting frameworks are used for the preparation of financial statements: HGB (Handelsgesetzbuch – German Commercial Code) and IFRS (International Financial Reporting Standards). Each framework serves different regulatory, economic, and reporting purposes, depending on a company’s size, legal structure, and capital market orientation.

• HGB is the traditional, legally binding accounting standard for German companies. It emphasizes creditor protection, prudence, and close alignment with tax rules.

• IFRS is required for companies listed on regulated EU markets and focuses on transparency and investor decision-usefulness, often relying on fair value measurement.

When HGB Applies

HGB accounting is the default standard in Germany. It applies to:

• All SMEs and non-listed corporations

• GmbH, UG, OHG, KG, and Sole Proprietors (e.K.)

• Companies that only file standalone annual financial statements

When IFRS Applies

IFRS is mandatory for:

• Companies whose securities are listed on a regulated EU exchange (for consolidated statements)

IFRS is optional (but allowed) for:

• Non-listed companies that want to increase transparency

• Firms seeking international comparability for investors or partners

• Groups preparing consolidated accounts voluntarily

Note: Standalone annual financial statements for German legal purposes must still follow HGB, even if consolidated accounts use IFRS.