Although a majority of German companies admit they would not
want to adopt IFRS for SMEs in its current form, the German
standard-setter warned that a powerful minority were still in
favour of using of international standards and there is a good case
for its adoption.

German Accounting Standards Board (GASB) president Liesel Knorr
also expressed doubts about the convergence process between IFRS
and US GAAP.

Speaking to TA for this year’s Germany survey (see A
year of transition), Knorr explained that there has been
considerable debate in Germany about the IFRS for SMEs exposure
draft. She said the German government has tried to promote the
country’s draft Commercial Code as an “equivalent but cheaper”
alternative to IFRS for SMEs. “They have found very good ground to
argue that way. The mood swings now and then and the mood for going
international was a lot better a number of years ago than it is
right now… therefore labelling something as a German equivalent but
even less costly alternative is of course a very good marketing
job,” she explained.

A GASB survey published in November last year found that about 80
percent of German companies do not want to adopt IFRS for SMEs in
its current draft form. Still, Knorr concedes that the minority has
a strong voice. She cited the example of a German manufacturer of
awnings that exports to the US and encountered difficulties when
asked for financial information and could produce information
prepared under the German Commercial Code.

“Who are we to stand in the way of these very good exporters?”
Knorr remarked. “If they need another legal environment, why not at
least help them and tell them that they get an option. On the other
hand, some people have argued that no one would want an option for
the IFRS for SMEs because countries rarely have options in
financial reporting.

“We did so in ’98 when we opened up for listed companies [the
choice] to use either US GAAP or IFRS. By 2004, of the DAX 30
[Deutscher Aktien IndeX – DAX 30], 28 companies no longer used
Commercial Code. So people are now afraid that if they did
something along those lines again, people might no longer use the
Commercial Code. I would not have anything against that.”

Speaking generally about the convergence process between the full
set of IFRS and US GAAP, Knorr observed that “there are a few very
odd pieces”. “I have been noting that on impairment, nothing is
happening,” she said. At present the US has a two-step approach to
impairment, compared with the single-step approach used in IAS
35.

“Unless they agree on that, they haven’t really converged and it’s
still one of the bigger differences, even on business combinations,
because they all have their old impairment rules in there and they
have had impairments sitting on the work plan for convergence, but
nothing is happening.

“I looked on the US FASB (Financial Accounting Standards Board –
FASB) website, they don’t even have it on their website as on their
work programme anymore, whereas the IASB still has it on the list
as a joint project, so nothing is happening [at the IASB]. The
[FASB] not even listing it, that tells you something about [the
closeness of their working relationship].”