The German Commercial Code (Handelsgesetzbuch) determines regulations concerning the preparation of the financial statements (balance sheet and profit and loss account) which should be complied with by all business entities regardless of their company form. All corporations must complete the financial statements by notes. Medium sized and large corporations should additionally prepare a management report. Capital market oriented corporations should amend the financial statement by a cash flow statement and a statement of changes in equity (if they are not obliged to prepare a group financial statement). Implementing several EU regulations in 2005, the application of IFRS became part of the German Commercial Code. Thus, the application of IFRS is mandatory for the group financial statements of capital market-oriented companies. In 2009, certain new rules were passed to make the German Commercial Code an equal but more cost-effective alternative to the IFRS (e.g. hedging and cost of goods).
For limited partnerships with a corporation as an unlimited partner (e.g. GmbH & Co. KG), widely the same regulations apply as for incorporated companies. The German Commercial Code defines three size classes: small, medium sized and large companies. The criteria used to determine to which size class the company belongs are balance sheet total, turnover, and the number of employees. In order to allocate a company to a particular size class the company must meet two of the three criteria in two successive years:
|Balance sheet total in Mil EUR||Turnover in Mil EUR||Annual average number of employees|
|Micro||up to 0.35||up to 0.7||up to 10|
|Small||up to 6||up to 12||up to 50|
|Medium size||up to 20||up to 40||up to 250|
|Large||more than 20||more than 40||more than 250|
According to its classification into the three size groups, a company must meet disclosure requirements, e.g. large corporations must disclose the balance sheet, the profit and loss account, the notes as well as the management report, whereas for small corporation simplifications in respect of the financial statements are granted. An audit of the financial statements as well as of the management report is mandatory for medium sized and large companies.