Precautionary principle

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In German accounting, the principle of prudence is understood as the principle that all risks and losses must be adequately taken into account in accounting . This assessment rule is to be used if incomplete information or the uncertainty of future events automatically give rise to assessment leeway. The principle of prudence thus serves to preserve capital and protect creditors . Internationally, the principle of caution is overlaid by the principle of "fair presentation".

Legal bases

The principle of prudence takes on a higher position in German accounting law. The General German Commercial Code of May 1861 aimed at comprehensive protection of creditors, with the principle of prudence being one of the most important guiding principles. Today's principle of prudence results from the apodictic formulation of Section 252, Paragraph 1, No. 4 of the German Commercial Code ( HGB) , according to which caution should be exercised. "In particular, all foreseeable risks and losses that have arisen up to the balance sheet date are to be taken into account, even if they only became known between the balance sheet date and the date on which the annual financial statements were drawn up ..." The chosen wording is mandatory and leaves the accounting company with no alternative with regard to the application of recognition and valuation questions, whereby both the recognition and the valuation of assets and liabilities must be carried out carefully. Under the premise that the accounting company observes the statutory provisions and exercises the permitted scope of assessment carefully and without arbitrariness, the result is a balance sheet that conforms to the principle of prudence. The idea behind the principle of prudence is that the position of a company is no better presented than it really is. The fact that the asset, financial and earnings situation may turn out to be worse than reality is accepted.

Consequential principles

In order to ensure that the principle of prudence can be implemented in an operational manner, two subsequent principles are anchored in law, namely the principle of implementation and imparity.

Realization principle

The realization principle is an expression of the traditional notion of creditor protection in German law. According to Section 252 (1) No. 4 Hs. 2 HGB, profits are only to be taken into account in the annual financial statements if they are realized on the closing date. In addition to the realization and periodization of income, the realization principle also regulates the realization and periodization of expenses. According to this, expenses must be recorded as expenses in the financial year in which the corresponding income was received. The balance of trade profit is thus designed as a realized profit for the period. So it regularly takes a turnover to trigger changes in assets.

Imparity principle

In contrast to unrealized profits, all unrealized risks and losses that were foreseeable up to the reporting date must be taken into account ( Section 252 (1) No. 4 Hs. 1 HGB). This also applies if they become known after the balance sheet date and up to the date on which the balance sheet was drawn up ( facts that improve value ). The imparity principle thus ensures that unrealized gains and losses are treated unequally. It is a consequential principle that corrects the realization principle. The imparity principle is applied both to the lowest value principle (and highest value principle ) and to the principle of setting up provisions for impending losses in pending transactions . However, the imparity principle has been repealed for a part of the entrepreneurial business activity by the Balance Sheet Modernization Act.

Balance Sheet Modernization Act (BilMoG)

Since the BilMoG came into force in May 2009, the imparity principle no longer applies without restrictions. The introduction of fair value assessment in Section 253, Paragraph 1, Sentence 4 of the German Commercial Code (HGB) partially undermines the principle of imparity. However, the fair value measurement (in German law this market value is called “fair value”) is only limited to certain insolvency-protected financial instruments and financial instruments in the trading portfolio acquired to meet pension obligations. This means that profits are added to the balance sheet that have not yet been realized. Profits - limited to the above transactions - are then to be recognized in profit or loss without a sales act and transfer of risk. Thus, the conservative German accounting for a defined sub-area of ​​the Anglo-American accounting comes closer.

However, there is a statutory distribution ( Section 268 (8) HGB) and transfer block ( Section 301 (1) HGB) for reported unrealized profits . The distribution block means that unrealized profits that have not yet been received may not be distributed. The transfer block only applies to companies with profit transfer agreements within the framework of tax groups . There is a special regulation for credit institutions according to Section 340e (3) sentence 1 HGB. These must make a risk deduction from the fair value in the amount that must correspond to the difference between the fair value at the time of accounting and the entry in the balance sheet. The government draft of the BilMoG emphasizes that “the principle of prudence, the principle of realization and the principle of reference date (retain) their previous meaning. Some of the provisions contained in the draft law are only weighted differently ... ”. The imparity principle not mentioned here has therefore lost its previous meaning.

Limits of the precautionary principle

Unjustified over-caution or even arbitrariness should be prevented by the principle of reasonable commercial judgment . This means that reasonable commercial judgment finds its limits in the exaggerated application of the principle of prudence from Section 252 (1) no. The BFH has narrowed this margin of appreciation in the case of provisions to the effect that “more reasons must speak for it than against it” for the later occurrence of the obligation. The assessment caution should not be based on unlikely extreme situations. Appropriate account has been taken of the principle of prudence if it can be assumed that there will be no higher burden on the annual result. Even a strong emphasis on the principle of prudence does not require anticipating likely future depreciation needs. Therefore, Section 253 (3) sentence 3 of the German Commercial Code (HGB) is no longer applicable, according to which there was an option to make depreciation due to future fluctuations in value.

International standards

The Principle of conservatism (FASB CON2, 91-97) and Principle of prudence (IASB § 37, IAS 1.13) are not given international priority. According to IFRS and US-GAAP, "fair presentation" is the top accounting principle. According to this, the annual financial statements must present a true and fair view of the asset, financial and earnings position. This principle also applies in German accounting law ( Section 264 (2) HGB), but it is considerably restricted by the principle of prudence. While according to US-GAAP fair presentation represents a so-called "overriding principle", according to which individual regulations can (or must) be deviated from in order to increase the informative value of the annual financial statements, the IAS / IFRS do not contain such an interpretation. In the framework ( framework ) of the IFRS this principle is used as a sub-item of the principle of reliability ( reliability out) (F.37). Accordingly, the principle of prudence serves to take account of the uncertainties associated with accounting and not to valuate assets too high and liabilities not too low. In contrast to German commercial law accounting, however, the conscious creation of hidden reserves is expressly prohibited. Overall, the principle of prudence is therefore of much less importance in accounting than the principle of prudence in Germany.

Otherwise, it is assumed that the underlying principles and the individual regulations as a whole lead to a presentation in the annual financial statements that meets the requirement of a credible presentation.

Deviations from the principle of caution

The strong position of the principle of prudence in German accounting law is also expressed in the fact that exceptions provided for deviations from this require explanation. If corporations intend to deviate from the principle of prudence, this must be explained in the annual financial statements, stating the reasons. The amount of influence of the deviation on the asset, financial and earnings position must be shown separately ( Section 284 (2) No. 3 in conjunction with Section 252 (2) HGB).

See also


  • Michael Raab: The "sensible commercial assessment" as an assessment technology in the preparation of annual financial statements under commercial law. A contribution for a way to interpret § 253 Abs. 4 HGB , 1991, ISBN 978-3-631-43778-0 .

Individual evidence

  1. ^ Ernst Heymann / Norbert Horn / Klaus Peter Berger, HGB commentary , 1995, p. 187.
  2. Marc Binger, The approach of provisions according to HGB and IFRS in comparison , 2009, p. 36.
  3. Roland Euler, principles of orderly profit realization , 1989, p. 87 ff.
  4. a b Thomas Drapinski, Effects of the Balance Sheet Modernization Act , 2009, p. 25 f.
  5. a b BT-Drucksache 16/10067 of July 30, 2008, government draft for BilMoG, p. 35 f. ( Memento of the original from April 19, 2009 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot /
  6. Torsten Blasius, IFRS, HGB and R & E: Taxation and Accounting , 2006, p. 59, footnote 425.
  7. ^ BFH judgment of February 15, 2006, BStBl. II 2006, pp. 749, 752
  8. ^ A b Wolfram Scheffler, Taxation of Companies II, Tax Balance Sheet Volume 2 , 2010, p. 90 f.
  9. Holger Philipps, accounting according to BilMoG , 2010, p. 97.