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HGB vs UK GAAP

German GAAP vs UK GAAP (FRS 102): a comparison for UK groups with a German entity

A UK reporting pack is a useful input to German statutory accounts, but it is not a German filing. This comparison uses the FRS 102 requirements effective for periods beginning on or after 1 January 2026, including the new lessee model. It shows where a UK parent should expect adjustments, which German documents still have to be prepared, and what evidence makes the conversion reviewable.

Last reviewed: 2026-08-28

First establish the reporting period

The FRC's Periodic Review 2024 amendments have a principal effective date of 1 January 2026. For periods beginning on or after that date, revised FRS 102 Section 20 puts most lessee leases on the balance sheet and revised Section 23 changes revenue recognition. A comparison written around the old operating-lease model is now stale; for earlier periods, confirm whether early adoption occurred.

HGB has not adopted those FRS 102 models wholesale. The German annual accounts are prepared under the HGB rules applicable to the entity and must be in German and euros under § 244 HGB. Keep the UK-period policy version in the conversion file so that a future reviewer can reproduce the starting point.

Point by point

Recurring differences for periods beginning on or after 1 January 2026.

Development costs

FRS 102 permits an accounting-policy choice to capitalise qualifying development expenditure or expense it; research remains expensed. HGB § 248(2) also permits qualifying development costs, but the recognition boundary and measurement must be tested under HGB and a distribution block under § 268(8) may arise. Preserve project-stage evidence rather than mapping one total.

Fair value and investment property

FRS 102 has specific fair-value requirements for investment property and other scoped items. HGB generally carries property at acquisition or production cost less depreciation and impairment under § 253; it has no general investment-property fair-value-through-profit model. Reconcile both carrying amount and deferred tax.

Leases

For periods beginning on or after 1 January 2026, FRS 102 removes the lessee operating-versus-finance lease distinction and recognises right-of-use assets and lease liabilities for most leases, with short-term and low-value exemptions. HGB has no general right-of-use model and instead assesses attribution of the underlying asset from the contractual and economic substance.

Deferred tax

FRS 102 Section 29 and HGB § 274 do not have identical mechanics. Under HGB, qualifying small entities are exempt under § 274a and recognition of a net deferred-tax asset is optional. Maintain a temporary-difference schedule by balance-sheet item; a nil HGB asset is not evidence that no difference exists for group reporting.

Revenue and contract data now need attention too

Revised FRS 102 Section 23 introduces a five-step revenue model for periods beginning on or after 1 January 2026. HGB recognises revenue through its statutory realisation and accrual principles rather than importing that model as a single standard. Straightforward delivered goods may align; bundled promises, variable consideration, contract modifications and long-term service arrangements require a contract-level check.

Request the contract population, performance obligations used in the UK pack, transaction-price allocation, cut-off evidence, contract assets and liabilities, and changes during the year. Then document whether the HGB result differs and why. A general ledger remap cannot answer those questions.

Format, language and a reviewable bridge

HGB prescribes the Bilanz and GuV structures in §§ 266 and 275. The GuV uses either the nature-of-expense method (Gesamtkostenverfahren) or cost-of-sales method (Umsatzkostenverfahren). Anhang means notes, while a required Lagebericht is a separate management report; it is not just a translated UK strategic report.

Build a line-by-line bridge showing the UK carrying amount, mapping, HGB recognition or measurement adjustment, tax effect, German presentation line and disclosure consequence. Reconcile opening equity, current-year result and closing equity. German labels and euros come at the output stage, after the accounting differences have been resolved—not as a substitute for them.

Audit and filing differ too

German size classes and audit scope must be tested independently of UK classifications. Medium-sized and large corporations are generally audited under § 316 HGB; micro and small entities are not covered by that general size-based requirement. Specific German group exemptions can exist, but they have their own HGB conditions. A UK Companies Act parent guarantee does not automatically carry over into German law, so obtain a German-law conclusion before removing an audit or filing step.

The HGB disclosure package goes to the Unternehmensregister, normally no later than 12 months after the balance-sheet date under § 325. Scope depends on German size class: a micro entity may qualify to deposit a shortened balance sheet under § 326(2), while larger classes disclose progressively more. Use the German legal class and filing period, not the parent's UK filing calendar.

Conversion request list for the UK parent

  • FRS 102 edition, accounting period and evidence of any early adoption.
  • Signed UK reporting pack, German trial balance and opening HGB bridge.
  • Lease register and contracts, including options, exemptions and modifications.
  • Revenue contract analysis under revised Section 23 and year-end cut-off evidence.
  • Development-project register, investment-property valuations and fixed-asset records.
  • Provision calculations and a balance-sheet-item deferred-tax schedule.
  • German size-class calculation, audit conclusion and disclosure checklist.
  • Reviewer sign-off on mapping, adjustments, translations and final HGB statements.

Frequently asked questions

Is HGB closer to UK GAAP or IFRS?

There are familiar features, but the answer depends on the transaction. Revised FRS 102 now aligns more closely with IFRS 16 for lessee leases and IFRS 15 for revenue, while HGB retains its own statutory models. Treat similarity as a starting hypothesis, not an accounting conclusion.

Can I just re-map my FRS 102 accounts to HGB?

No. A line mapping handles presentation only. You still need contract- and item-level analysis for leases, revenue, development costs, property, provisions and deferred tax, followed by the German-language HGB statements and disclosures.

Does HGB require deferred tax like FRS 102?

HGB § 274 applies its own balance-sheet-oriented rules. Qualifying small entities are exempt under § 274a, and recognition of a net deferred-tax asset is optional. FRS 102 uses a different Section 29 model, so retain the underlying difference schedule even where the HGB balance is nil.

Do UK and German operating leases get the same treatment?

Not for current FRS 102 periods. For periods beginning on or after 1 January 2026, most lessee leases create a right-of-use asset and lease liability under revised Section 20, subject to exemptions. HGB has no general equivalent and requires an attribution assessment.

Is a German subsidiary audited if the UK parent guarantees it?

Do not assume the UK guarantee transfers. German audit scope starts with § 316 and the German size class; any German group exemption has separate statutory conditions. Obtain a German-law conclusion based on the actual group structure and filings.

When did the FRS 102 lease rules change?

The Periodic Review 2024 amendments have a principal effective date of 1 January 2026, with early application permitted. Determine the beginning date of the reporting period and whether the entity adopted early before choosing the comparison model.

Primary sources and scope

Authoritative references for the key claims on this page. Check the current text before making a filing or accounting decision.