BALANCE SHEETS
Preparing the annual balance sheet, income statement and notes is not only required by German law but also can help the management determine the adequacy of its internal control, highlight areas of weakness and identify inaccurate reporting of information.

We can assist in the preparation of annual accounts for presentation to management, shareholders, banks and other institutions, the Commercial Register and the Tax Authorities.

We can assist in preparing the financials both according national accounting standards (commercial law and tax law) and international accounting standards (IFRS/US-GAAP).

FORM AND CONTENT OF FINANCIAL STATEMENTS
In Germany all business enterprises are obliged to draw up financial statements every year. The financial reporting and publication requirements vary according to the size and legal form of the company concerned.
For Sole Proprietorships and Partnerships, which meet two of the following three criteria:

• balance sheet total of less than € 65 million
• sales less than € 130 million
• number of employees less than 5,000

There are only general legal requirements regarding the form and content of financial statements. As a minimum, financial statements must consist of a balance sheet and a profit and loss statement. They must be prepared in German and in Euro. Assets and liabilities must be shown in detail. Assets and liabilities and income and expense items may not be set off against each other. Consistency is prescribed by law in respect of the classification of balance sheet and profit and loss items.

Partnerships - except the "GmbH & Co. KG" - exceeding two of the three criteria prescribed above have to observe additional financial reporting requirements. The financial statements of these companies have to be audited by a German Certified Accountant.

In addition to the balance sheet and profit and loss statements limited companies and limited partnerships in the legal form "GmbH & Co. KG" also have to prepare notes to the financial statements and a management report. Companies are categorised as small or medium-sized if they do not exceed at least two of the following three criteria:

• Small (Medium)
• Balance sheet total € 3,438,000 (€13,750,000)
• Sales € 6,875,000 (€ 27,500,000)
• Number of employees 50 (250) (average p.a.)

Small companies are allowed to prepare an abbreviated balance sheet in which only specific items need to be included separately. There are some other exceptions for small and medium sized companies relating to the profit and loss statements and to the notes to the financial statements.

ACCOUNTING PRINCIPLES
Accounting and valuation principles are laid down in the Commercial Code (Handelsgesetzbuch) as follows:

• Financial statements have to be correct, understandable and complete.
• Values must be determined prudently. All foreseeable risks and losses arising up to the balance date have to be taken into account, but profits may only be taken up if they are realised at the balance sheet date.
• The valuation methods applied in the preceding financial statements should be retained.
• The going concern principle has to be followed.
• The financial year usually corresponds with the calendar year. The length of the financial year may not exceed twelve months.

The financial statements have to give a true and fair view of the financial affairs of the company.

PUBLIC FILING REQUIREMENTS AND AUDITING
Publishing financial statements is required for corporations, limited partnerships in the legal form "GmbH & Co. KG" and for partnerships exceeding two of the three criteria prescribed above. The financial statements and the management report have to be audited by a German Certified Accountant with the exception of Small Corporations and small limited partnerships in the legal form "GmbH & Co. KG".