Important Features of Capital Maintenance in Germany

German GAAP can be categorized as typical Continental European (Fülbier, R. U., C. Pelger, E. M. Kuntner, and M. Bravidor. 2017. “The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Austria and Germany.” Accounting in Europe 14 (1–2): 13–28; Nair, R. D., and W. G. Frank. 1980. “The Impact of Disclosure and Measurement Practices on International Accounting Classifications.” The Accounting Review 55 (3): 426–50) with a primary focus on creditor protection by means of a strong prudence (or conservatism) principle and the priority of the profit (dividend) determination function compared to the information function of financial statements. The increasing internationalization of German companies lead to a questioning of German GAAP and, ultimately, the introduction of IFRS. IFRS became not only mandatory for consolidated financial statements of listed companies but influenced German GAAP as such. Indeed, some elements in German GAAP were more aligned over time with some IFRS features to improve information quality of German GAAP financial statements. To adapt capital maintenance to these new elements and maintain a strong creditor protection, specific dividend distribution restrictions were introduced. The purpose of this paper is to provide a general presentation of the important features of capital maintenance in Germany with a particular focus on the accounting-induced specific dividend distribution restrictions.