Accounting Treatments for Goodwill and Other Intangible Assets in Germany.

Abstract The article presents a discussion on the aspects of financial accounting systems in Germany by referring to goodwill and intangible assets. Under the German legal system, financial accounting and reporting are subject to detailed regulation of the commercial code and principles of proper bookkeeping, Grundsätze ordnungsmäiger Buchfühnmg (GOB). The Commercial Code and GOB are relevant for individual accounts, group accounts and tax accounting as long as there are no different regulations within the tax laws. The legal function of group accounting is confined to the provision of information. Intangible fixed assets, which have been acquired for a consideration, must be shown in the balance sheet. The same applies to intangible current assets, regardless whether they have been produced or acquired. In individual commercial accounts, goodwill may be taken up into the balance sheet if it has been acquired. From an economic point of view intangibles can be the most valuable assets of a firm. Admittedly, the rules for group accounting are not consistent with the information function of group accounts. The option to capitalize goodwill or to charge it against equity in the consolidation process follows no clear strategy.