American Accounting Association 2006 Midwest Region Meeting March 30 – April 1 Chicago, Illinois

Friday, March 31, 9:40 a.m. - 10:20 a.m.
Forum Papers

Title: Accounting Internationalization in Germany: The Case of DAX-30 Companies

Eva K. Jermakowicz University of Southern Indiana

Ingeborg Wulf University of Oldenburg, Germany

ABSTRACT: This study analyzes the adoption of International Financial Reporting Standards (IFRS) in the premium segment of the German stock market, the DAX-30. In accordance with the European Union (EU) Regulation (EC) 1606/2002, IFRS will be required for consolidated financial statements for EU publicly traded companies by the December 2005 fiscal year end. The study provides insight into IFRS implementation problems based on a survey sent to DAX-30 companies. In 2004, 19 DAX-30 companies used IFRS as their basis of accounting for consolidated accounts; nine companies applied U.S. GAAP; and only two companies reported under German HGB. Factors influencing selection of type of accounting standards (IFRS, U.S. GAAP or German HGB), and benefits and challenges of implementing IFRS are analyzed, as well as the impact of conversion to IFRS on consolidated equity and net income. Overall, our analysis reveals a consistent effect of the financial statement impacts of adopting the shareholder-oriented IFRS from a stakeholder-oriented accounting system such as HGB. For most companies, IFRS-based shareholders’ equity is higher than HGB-based equity. Principal differences between IFRS and German accounting rules having a major impact on the adoption of IFRS include: deferred taxes, pensions, provisions, financial instruments, goodwill and other intangible assets, and impairment tests. Efforts towards global accounting convergence are analyzed.

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