US-Owned Subsidiary

US parent, German subsidiary: running HGB alongside your US GAAP close

If a US company owns a German GmbH, you effectively maintain two views of the same entity: the local HGB statutory accounts that Germany requires, and the US GAAP figures the parent consolidates. This page covers how they relate, the differences your team will meet, and how to time the German statutory work around the US close.

Two views of one entity

Your German subsidiary must prepare stand-alone statutory statements under the HGB — Bilanz, GuV and, depending on size, Anhang and Lagebericht — in German and euros (§ 244 HGB). You cannot file US GAAP accounts in Germany; the local statutory duty is HGB-specific.

For group reporting, the same entity is also stated under US GAAP and rolled into the parent's consolidation. The clean approach is to treat HGB as the local book of record, then derive a US GAAP reporting package on top of it via a defined set of adjustments. jahresabschluss.io prepares the single-entity German statements; the parent's consolidation stays with the group team.

Differences your team will hit

HGB is creditor-protection and prudence driven; US GAAP is investor-oriented. The gaps that matter most in a subsidiary conversion:

Historical cost vs fair value

HGB caps most assets at historical cost (§ 253 Abs. 1) with no upward revaluation. US GAAP applies fair value to more items, so mark-ups recognised for the group are reversed for HGB.

Provisions (Rückstellungen)

HGB recognises provisions relatively readily under § 249 for uncertain liabilities and certain onerous positions. US GAAP applies a higher probability threshold, so provision timing and amounts often differ.

Development costs & R&D

US GAAP generally expenses R&D; HGB permits capitalising internally generated development costs as an option. The two views can diverge on the intangible asset line.

Deferred taxes

HGB deferred taxes follow § 274 and small entities are largely exempt (§ 274a). US GAAP applies a comprehensive temporary-difference model, so the deferred tax figure rarely ties out directly.

Timing: the US close vs the German calendar

The US parent typically needs the subsidiary's reporting-package numbers within days of period-end. The German statutory deadlines are far longer: preparation within 3 months (medium and large) or 6 months (small and micro) of the balance sheet date under § 264 Abs. 1 HGB, and filing within 12 months under § 325 HGB.

The practical sequence is to submit the fast US GAAP package first for the group close, then finalise the HGB statutory statements against the same trial balance later in the window. Keeping both off one reconciled trial balance avoids two conflicting versions of the year.

What the German subsidiary sends up

  • A trial balance mapped from the German chart of accounts (SKR03/SKR04) to the group's chart of accounts.
  • Intercompany balances and transactions flagged for elimination in the parent's consolidation.
  • A schedule of HGB-to-US-GAAP adjustments (fair value, provisions, development costs, deferred taxes, leases).
  • Local tax figures and the HGB fixed-asset movement schedule (Anlagenspiegel, § 284 Abs. 3) for medium and large entities.
  • The final German statutory statements themselves, so the group has the filed local truth on file.

Reconciling HGB to US GAAP

A workable model is a bridge: start from HGB profit and equity, then list each adjustment that moves you to US GAAP, with a statutory basis on the HGB side and a US GAAP treatment on the other. Because HGB is more conservative on revaluation and more willing to book provisions, most bridges show HGB equity below US GAAP equity, with timing differences that reverse over asset and provision lives.

Document the bridge once and reuse it each period. The recurring items are stable, so after the first year the reconciliation is largely a roll-forward rather than a fresh analysis.

Frequently asked questions

Can we file US GAAP accounts for our German subsidiary?

No. The German entity must file HGB statutory statements in German and euros (§§ 244, 264 HGB). US GAAP figures are used only for the parent's group reporting, not for the local filing.

What are the biggest HGB vs US GAAP differences?

Historical-cost measurement with no fair-value step-ups (§ 253), earlier and broader recognition of provisions (§ 249), the option to capitalise development costs, and a different deferred-tax model (§ 274). These drive most of the reconciliation.

When are German statutory accounts due compared with our US close?

Much later. HGB preparation is due within 3 months (medium/large) or 6 months (small/micro) of year-end and filing within 12 months. You can deliver the US GAAP package first, then finalise the statutory HGB statements.

Does the German subsidiary need its own audit?

Only if it is medium or large under § 267 HGB. A small or micro US-owned subsidiary is not subject to a statutory audit, independent of whether the US parent is audited.

Who reconciles HGB to US GAAP?

Usually the group finance team, using the subsidiary's HGB statutory numbers as the starting point. jahresabschluss.io prepares the single-entity HGB statements that anchor that reconciliation; it does not produce the group's US GAAP consolidation.