This study investigates whether the 2009 German Accounting Law Modernization Act has affected the reporting and accounting practices of German private firms. In reforming German accounting standards, numerous accounting options were deleted, several accounting rules were transferred from IFRS to German GAAP with some modifications, and disclosure requirements were extended. In our analysis, we examine the changes in financial reporting and their effects on disclosures. We use four financial reporting property measures: discretionary accruals, the correlation between operating cash flow and accruals, the persistence of earnings, and the predictability of earnings. The results reveal no change across all financial reporting properties. Examining disclosure compliance for capitalized development costs and other provisions reveals substantial variation in compliance.
At a first glance the IFRS can be described as an accounting system which favors the asset-liability perspective, using a fair value measurement model. This view conflicts with the German cost-orientated tradition. Nevertheless, in the last years there had been some changes in the accounting system in Germany. One of the most important changes is the German Accounting Law Modernization Act which was enacted in 2009.This article takes the chance to have a closer look into the German accounting rules in force and to analyze whether they changed essentially-and if so in which way the changes were influenced by the international accounting standards. Thus, the authors analyze similarities and differences in the revenue recognition, the recognition of assets and liabilities in IFRS and the German principles of proper bookkeeping and whether a movement of the principles of proper bookkeeping towards the IFRS took place.
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