The Lagebericht

The German management report (Lagebericht): § 289 HGB and DRS 20

The management report — the Lagebericht — is the narrative half of a German annual report: a written account of how the business performed and where it is heading. This page explains what the Lagebericht is, why only medium and large corporations must prepare one (§ 289 HGB), and what belongs in it.

What the Lagebericht is

The Lagebericht is a separate report that accompanies, but is not part of, the financial statements. Where the Bilanz, GuV and Anhang present and explain the numbers, the Lagebericht steps back and describes the course of business, the company's position, and its expected development in prose (§ 289 HGB).

It is management's own account, so it carries a degree of judgement the statements do not. An auditor of a medium or large company checks that the Lagebericht is consistent with the financial statements and gives no misleading impression.

Who must prepare one

This is the key point for smaller companies: the Lagebericht is not universal. Under § 264 Abs. 1 Satz 4 HGB, small and micro corporations are exempt — they prepare only the Bilanz, GuV and, for small entities, the Anhang. Only medium and large corporations must add a management report.

So a small GmbH never files a Lagebericht, which removes a substantial drafting burden. The obligation appears only once a company reaches the medium size class on two consecutive balance sheet dates, or is capital-market-oriented.

What the report must contain

Business review (Wirtschaftsbericht)

A balanced analysis of the course of business and the company's position, with the financial and, where material, non-financial performance indicators management uses to steer it.

Risks and opportunities

The material risks and opportunities facing the company, including how financial risks are managed (§ 289 Abs. 1). This risk-and-forecast section is the part readers scrutinise most.

Forecast (Prognosebericht)

An outlook on expected development, with the assumptions behind it. It looks forward at least one year and must be specific enough to be useful.

Further statements

Where relevant, a report on research and development, existing branches, and the internal control and risk-management system for capital-market-oriented companies (§ 289 Abs. 4).

The role of DRS 20

The German Accounting Standard DRS 20, issued by the national standard-setter, gives detailed guidance on how to prepare the Lagebericht. It is not a statute, but following it is presumed to satisfy § 289, so in practice DRS 20 defines the expected structure — economic report, forecast report, and risk and opportunity report.

DRS 20 also shapes the tone: the report should be balanced, entity-specific and free of boilerplate. A forecast that says only 'we expect continued development' does not meet the standard; management must state a direction and the reasoning behind it.

Lagebericht versus Anhang

The two are easy to confuse. The Anhang is part of the financial statements and discloses specific, mostly quantitative facts required by §§ 284–288. The Lagebericht is a standalone narrative that analyses performance and looks forward. A medium company prepares both; a small company prepares the Anhang but no Lagebericht.

Because it is forward-looking and discretionary in emphasis, the Lagebericht is also where larger companies address strategy, sustainability and non-financial matters that the numbers alone cannot convey.

In practice, a medium company's Lagebericht

  • Opens with a description of the business model and the markets it operates in.
  • Reviews the year against the prior year using the company's own key figures.
  • Analyses the financial position, liquidity and capital structure.
  • Sets out the principal risks and how they are managed, alongside the opportunities.
  • Gives a forecast for at least the coming year, with the assumptions behind it.
  • Adds a research-and-development or branch section where applicable.

Frequently asked questions

What is a Lagebericht?

The Lagebericht is the German management report: a narrative account under § 289 HGB of the course of business, the company's position, its risks and opportunities, and its expected development. It accompanies the financial statements.

Which companies must prepare a Lagebericht?

Only medium and large corporations. Small and micro corporations are exempt under § 264 Abs. 1 Satz 4 HGB, so most GmbHs never prepare a management report.

What is the difference between the Lagebericht and the Anhang?

The Anhang is part of the financial statements and gives specific disclosures (§§ 284–288); the Lagebericht is a separate, forward-looking narrative analysing performance and outlook. Medium and large companies prepare both.

What is DRS 20?

DRS 20 is the German Accounting Standard that details how to prepare the Lagebericht. It is not law, but complying with it is presumed to meet § 289, so it effectively defines the report's structure and quality.

Does a small GmbH need a management report?

No. Small and micro GmbHs are exempt from the Lagebericht (§ 264 Abs. 1 Satz 4). They prepare the Bilanz, GuV and, for small entities, the Anhang, but no management report.