Jahresabschluss.io
DESign inRegister →

HGB vs IFRS

HGB vs IFRS: how German GAAP and IFRS actually differ

HGB and IFRS are not two interchangeable ways to format the same trial balance. They differ in purpose, recognition, measurement, presentation and disclosure—and the direction of a profit or equity difference cannot be predicted from a slogan. This guide explains the recurring adjustments for a German entity, which statements German law still requires, and what to collect before you start a reconciliation.

Last reviewed: 2026-08-28

Different objectives, without the usual caricature

HGB annual accounts serve several German company-law functions, including information, creditor protection, capital maintenance and determination of distributable profit. The prudence and realisation principles in § 252 HGB make parts of the model asymmetric: qualifying foreseeable losses are recognised before unrealised gains. That does not mean that every HGB number is designed to be as low as possible.

IFRS general-purpose financial statements are aimed primarily at investors, lenders and other creditors. IFRS is not simply a fair-value system: many assets remain at cost, and fair value is required or permitted only where the relevant standard says so. Start a comparison from the applicable rule and the underlying contract, not from an assumption that IFRS always produces higher assets or profit.

Point by point

Four areas that commonly create reconciliation entries; each still depends on the facts and policy choices.

Measurement basis

Under § 253 HGB, acquisition or production cost is generally the upper limit for non-financial assets, followed by depreciation or impairment where required. IFRS also uses cost widely, but individual standards may require or permit another model—for example fair value for qualifying investment property or financial instruments. Identify the standard and election before posting a difference.

Development costs

HGB § 248(2) permits qualifying internally generated development costs to be capitalised but excludes research and specified internally generated rights. IAS 38 expenses research and requires recognition of development expenditure once all criteria are demonstrated. A project-stage register and contemporaneous evidence are therefore more useful than a year-end percentage estimate.

Provisions and discounting

HGB measures a provision at the necessary settlement amount under prudent commercial judgement and applies statutory average-market discount rates to qualifying longer-term provisions. IAS 37 uses the best estimate of the expenditure required and, where discounting is material, a current pre-tax rate reflecting relevant risks. Cash-flow assumptions and the discount-rate source both need reconciliation.

Leases

HGB has no general IFRS 16 right-of-use model. Recognition follows attribution of the underlying asset based on the contractual and economic substance; many ordinary rental arrangements therefore remain with the lessor and the lessee records expense. IFRS 16 generally recognises a right-of-use asset and lease liability for a lessee, subject to its exemptions.

Why the profit difference has no universal direction

A fair-value uplift can increase IFRS equity, while an IFRS 16 lease may change both assets and liabilities and shift expense timing. Mandatory IAS 38 development-cost recognition can increase an IFRS result when HGB used the expense option; a different provision estimate can move the result in either direction. Deferred tax then adds a second-order effect.

A credible bridge therefore starts with a complete difference register. For every item record the HGB carrying amount, IFRS carrying amount, gross adjustment, tax base, deferred-tax effect, current-period profit effect, equity effect and reversal pattern. The bridge should reconcile opening equity, current-year movement, cash-neutral entries and closing equity—not merely produce a list of journal entries that happens to balance.

Which accounts a German entity actually needs

A German corporation still prepares individual annual accounts under HGB for German company-law purposes, including capital maintenance and distributions. Disclosure is more nuanced than the common claim that an IFRS single-entity statement can never be filed: § 325(2a) HGB allows qualifying capital-market-oriented companies to disclose an EU-endorsed IFRS individual set instead of disclosing the HGB set if the statutory conditions are met. That disclosure option does not remove the underlying HGB annual-account requirement.

Article 4 of the EU IAS Regulation requires EU-endorsed IFRS consolidated accounts where a company governed by an EU Member State has securities admitted to trading on an EU regulated market. It is not a rule for every company described loosely as listed. German law also allows certain voluntary IFRS consolidated accounts under § 315e HGB. A group can consequently need HGB entity accounts, IFRS consolidation reporting packages and an IFRS consolidated set at the same time.

A practical HGB-to-IFRS request list

  • Latest signed HGB trial balance, account mapping and opening IFRS reconciliation.
  • Lease population with contracts, options, payment schedules and prior modifications.
  • Development-project register separating research, development phase, recognition evidence and costs.
  • Fixed-asset register with useful lives, components, impairment evidence and any revaluation data.
  • Provision files with expected cash flows, timing, probability assessment and discount-rate support.
  • Tax bases and tax rates for every temporary difference, plus loss-carryforward evidence.
  • Group reporting policies, materiality, chart of accounts, related-party data and disclosure questionnaire.
  • A reviewer-approved bridge from opening equity through profit and other comprehensive income to closing equity.

Disclosure burden is also different

HGB preparation and disclosure reliefs scale with the legal size class and other conditions. Micro and small entities can use substantial reliefs; medium-sized entities still have a more extensive package and an audit requirement. IFRS disclosures are driven by the applicable standards, materiality and the entity's transactions rather than the German micro, small, medium and large filing ladder.

Do not decide the framework from size alone. Establish legal form, group role, capital-market status, applicable reporting period and intended use of the statements first. The accounting policy decision and the German filing decision are related, but they are not the same decision.

Frequently asked questions

Can a German GmbH file IFRS instead of HGB?

A German GmbH still needs HGB individual annual accounts for German company-law purposes. A narrow disclosure option in § 325(2a) HGB lets qualifying capital-market-oriented companies disclose an EU-endorsed IFRS individual set instead of the HGB set, subject to conditions; it does not replace the underlying HGB measurement of distributable profit.

Is HGB or IFRS more conservative?

HGB applies an explicit prudence and realisation framework, but it is misleading to promise that HGB profit or equity will always be lower. Development-cost choices, leases, provisions, impairment, fair value and tax effects can offset one another. Calculate the bridge.

Do German listed companies use IFRS?

EU-endorsed IFRS consolidated accounts are mandatory under Article 4 of Regulation 1606/2002 when the company's securities are admitted to an EU regulated market. The German individual HGB accounts remain relevant for company-law purposes.

Why does HGB keep leases off the balance sheet?

HGB does not use a general right-of-use model. It attributes the underlying asset according to the contract's legal and economic substance, so many ordinary rentals stay with the lessor. Classification must still be assessed; off-balance-sheet treatment is not automatic for every contract called a lease.

Does converting from IFRS to HGB change my profit?

Often, but neither the size nor direction is universal. Reconcile recognition, measurement, tax and reversal timing item by item, then bridge opening equity, current profit and closing equity.

Is IFRS always fair value and HGB always historical cost?

No. IFRS uses cost for many assets and allows or requires fair value only under particular standards and conditions. HGB generally uses acquisition or production cost as an upper limit for non-financial assets, with specific exceptions and separate rules for financial institutions.

Primary sources and scope

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