A comparison between US GAAP and German HGB

A comparison between US GAAP and German HGB A comparison between US GAAP and German HGB By January 2014 Supervisor: PERMISSION TO STORE RESEARCH PAPER IN LIBRARY AND MAKE AVAILABLE FOR USE I, Claudiu Ghiuzan, do hereby irrevocably consent to and authorize the Library of University of Applied Management Studies, Mannheim, to file the attached Research Paper entitled: â€Å"A comparison between US GAAP and German HGB†, and make such paper available for use, circulation, and reproduction by Library users at the University of Applied Management Studies, Mannheim. I state at this time that the contents of this paper are my own work and completely original. ____________________________________________ (Signature) _______________________________________________ (Date) Chapter 1 1. Introduction When the multinational enterprises work with different accounting systems it might be possible to come with different results at the end of the year. This is the case of Siemens AG with the annual report from 2000. The German corporation ´s stock has been traded on the NYSE (New York Stock Exchange) and according to their report from US GAAP (General Accepted Accounting Principles) their net income was â‚ ¬8,860 million while on German GAAP based on the same calculations their net income was reported as â‚ ¬7,901 million. This means practically 14% more net income (Bruetsch 2003). HGB and US GAAP are different accounting systems that companies use to organize their financial statements. HGB is primary used for companies in Germany and US GAAP in United States. Basically the financial reports of the multinationals are written according to the financial standards from the country they operate. This research paper will give you an overview of the main differences between the both systems and will help you to better understand the practices used by the two important market leaders in the world. Chapter 2 2.1 Literature review 2.2 U.S. GAAP The accounting standards in United States have been first set by the AICPA (American Institute of Certified Public Accountants). In 1939 AICPA created also the Committee on Accounting Procedure and after this in 1959 it was replaced by Accounting Principles Board. In 1984 the Public Company Accounting Oversight Board (PCAOB) and the Governmental Accounting Standards Board (GASB) determined the accounting standards in U.S (PWC.com, 2012). The US GAAP is influenced basically by the Common Law of United states. 2.3 German GAAP Different from US GAAP is the German HGB or Handelsgesetzbuch, a commercial code established first in 1897 and replaced in 1938 conform the European standards. The German accounting system was used also in Austria since 1938 (Investopedia.com). There are many differences between the German and U.S. accounting standards and it seems quite important for the financial employees to know them, mostly when they work in a multinational company. Some of the major differences consist in value-added tax, capitalization of software costs, personnel restructuring, employee share purchase plans, deferred income including derivatives, maintenance accruals, unrealized gains on marketable securities and share offering costs. The following section will analyse this differences and will offer a better understanding of the terms used in German GAAP and U.S. GAAP. Chapter 3 3.1 General Analyses 3.2 Value-added tax In the German GAAP the value-added tax or VAT needs to be depreciated and the VAT recoveries recorded as other operating income. Under U.S. GAAP the capitalized VAT is considered a long-term receivable rather than plant and equipment or property. For that reason the depreciation and operating income are not recognized (Alexander et al. 2004). 3.3 Personnel restructuring Under U.S. GAAP, the estimated cost of employee separation are accrued in the period that the employee accepts the offer of termination while under German GAAP these costs are often financial on the basis of the Company when it announced the intention to reduce its workforce (Alexander et al. 2004). 3.4 Deferred income including derivatives According to U.S. GAAP the income of a company from a basic agreement is to be distributed over the duration of the agreement while under German GAAP this income is to be considered in accordance with the economic useful life (Alexander et al. 2004). â€Å"Under German GAAP, gains and losses resulting from the termination of interest rate swaps are recognized in the year of termination while according to U.S. GAAP, gains and losses on interest rate swaps accounted for as hedges are amortized over the remaining outstanding period of the interest rate swap or the remaining life of the hedged position, whichever is shorter† (Alexander et al. 2004). Under German GAAP, â€Å"the foreign currency forward contracts and options used to hedge against the currency risk involved with a planned acquisition† are accounted as a hedge without affecting net income â€Å"as an offset against the acquisition cost of the investment† while under U.S. GAAP may not be accounted for as a hedge (Alexander et al 2004). 3.5 Maintenance accruals The German GAAP requires that the cost of maintenance associated to the financial year and only the ones incurred within the first three months of the following year have been accrued at every end of the period while under U.S. GAAP, the cost of maintenance is considered in the periods incurred (Alexander et al. 2004). 3.6 Unrealized gains on marketable securities Under U.S. GAAP the marketable equity securities other than investments accounted for by equity method or marketable debt, are classified as either available for sale, or as trading, or held to maturity while under German GAAP they are generally carried at historical cost. â€Å"Securities classified as trading or available for sale are reported at fair value at the balance sheet data and held to maturity securities are reported at historical cost. Unrealized gains and losses on trading securities are recorded in net income while unrealized gains and losses on securities categorized as available for sale are recorded, net of income tax, in shareholders ´ equity† (Alexander et al. 2004). 3.7 Share offering cost The share offering costs are written as extraordinary expenses in the income statement according to German GAAP while under U.S. GAAP are charged against the proceeds of the offering (Alexander et al. 2004). Jà ¼rgen Kirsch, a professor of Finance at the University of Munster explain that the essential differences between German GAAP and U.S. GAAP are seen better at the capital markets and at investors. According to his paper in the financial structure of Germany the capital markets are less important than bank loans while in USA the capital markets are more important than banks. Furthermore the shareholder structure in USA is based on broad distribution of shares while in Germany the private investors are less important (Kirsch 2012). Looking at the basis for tax calculation and distributions we can see that USA has no influence on tax law and in Germany â€Å"tax dictates financial accounting† was abolished. The distribution rules are also different under German GAAP and U.S. GAAP. In Germany building of reserves and distribution constraints are controlled by law, and there are minimum distribution rules based on single accounts. However in USA there are almost no regulations to build reserves. The board determines the distribution and it is based on group accounts (Kirsch 2012). Another significant differences between HGB and US GAAP according to KPMG, one of the biggest professional service companies in the world, are the provisions. The provisions have different recognition criteria, different measurement criteria and different selected specific areas. 3.8 Provisions Recognition criteria Under German GAAP the provisions are based more on the principle of prudent accounting while under U.S. GAAP are recorded for legal/contractual obligations or constructive obligations. The German HGB allows also provisions where no third-party liability exist for example expense accruals, planned repairs or internal costs of the year-end closing. Under U.S. GAAP a liability must exist to a third party at the balance sheet date (KPMG, 2005). Different measurement The measurement criteria are also different. Under U.S. GAAP the amount of provision is based on best estimate while HGB allows greater flexibility and accruals could be substantially higher than under U.S. GAAP (KPMG, 2005). 3.9 Foreign currency translation The German GAAP requires that the financial statements must be recorded in the Euro currency and no other currencies are allowed. Under U.S. GAAP there is no specific currency underlined (KPMG, 2003). 4.0 Tax influences on the Balance sheet According to Grabowski ´s paper under the German GAAP the tax balance sheet and commercial balance sheet are closely connected to each other while under the U.S. GAAP there are no tax influences on the financial statement because the commercial balance sheet is separated from the tax balance sheet (Grabowski, 2012). Chapter 4 5.1 Conclusion This paper provided abroad understanding of the key differences between U.S. GAAP and German GAAP and offered a better analyse of the concepts. Even though both financial systems have some differences in the structure, the basic principles do not differ so much. We can probably say that this differences are influenced by the different laws systems of the countries. Germany for example is based on civil code which has an extensive number of regulations that should be applied to as many special cases as possible and transferred to similar cases while USA is based on common law which implies a limited number of regulations. Here the rules are applied to special cases they were invented for and are decided for individual cases by jurisdiction. After all we can say that U.S. GAAP and German GAAP are simply a combination of dependable standards and due to globalization it become necessary for multinational to understand the both systems in order to operate in this powerful economies. However in the future it might be possible that companies from both countries to report their financial data just according to one financial system. References Alexander, D., Noble, C. (2004), â€Å"Financial Accounting: An International Introduction Second Edition†, Pearson Educational Limited 2004. Available at: http://books.google.de/books?id=_oe7rGbzdBsCpg=PA406lpg=PA406dq=differences+between+hgb+and+us+gaapsource=blots=iKY7Xicu3asig=3jlQYyYW0OxDFP8HJqSepxbhPGghl=rosa=Xei=-SbgUv6gHcLcswagr4HgBQved=0CF8Q6AEwBjgK#v=onepageq=differences%20between%20hgb%20and%20us%20gaapf=true [Accessed at 23 Jan. 2014]. Bruetsch, M. (2003), â€Å"U.S. GAAP and German HGB – A comparative Approach†, Oxford Brookes University, [online]. Available at: http://www.grin.com/en/e-book/14850/u-s-gaap-and-german-hgb-a-comparative-approach [Accessed at 22 Jan. 2014]. Grabowski, P. (2012), â€Å"Die wichtigsten Unterschiede zwischen HGB, IAS US-GAAPâ€Å" [online]. Available at: http://www.petra-grabowski.de/Schulungen/Diploma_Bilanzierung/Bilanzierung-8_Unterschiede_IAS_HGB_US-GAAP.pdf [Accessed at 23 Jan. 2014]. Kirsch, H., J., †International Financial Reportingâ€Å", Institut fà ¼r Rechnungslegung und Wirtschaftsprà ¼fung Westfà ¤lische Wihelms-Università ¤t Mà ¼nster 2012, [online]. Available at: http://www.wiwi.uni-muenster.de/25/content/html_de/studieren/material/11wise_IRL_Kap1.pdf [Accessed at 22 Jan. 2014]. KPMG (2003) ‘Implementing IFRS – Extract from: IFRS compared with US GAAP and German GAAP’ [online]. Available at: http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/IFRS-German-GAAP-O-200303.pdf [Accessed at 23 Jan 2014]. KPMG (2005) â€Å"Provisions-Significant differences between IFRS/HGB/US-GAAP† [online]. Available at: http://www.agig.de/53-2.pdf [Accessed at 23 Jan. 2014]. Investopedia (no date available), â€Å"Handelsgesetzbuch-HGB† [online]. Available at: http://www.investopedia.com/terms/h/hgb.asp [Accessed at 23 Jan. 2014]. PWC (2012), â€Å"AP: similarities and differences- 2012†, [online]. Available at: http://www.pwc.com/us/en/cfodirect/issues/ifrs-adoption-convergence/ifrs-and-us-gaap-similaries-differences-2012.jhtml [Accessed at 23 Jan. 2014]. 1

Animal Abuse

Many people have taken animals for granted since a long time. Thomas Edison once said, â€Å"Non-violence leads to the highest ethics, which is the goal of all evolution. Until we stop harming all other living beings, we are still savages. † Animal cruelty is an ongoing problem that many people disregard in today’s society. It is mainly caused by the use, neglect, and intentional mistreatment of animals, all of which can still be prevented by stricter laws, awareness, and education. It’s said that an animal dies in a laboratory every three seconds. An estimated 25 to 35 million animals are helplessly used in the United States each year for three main purposes; biomedical and behavioral research, education, and drug and product testing (Fox, 58). Animals range from mostly rodents to rabbits, cats, dogs, and monkeys. The conditions in which laboratory animals are kept in are not good at all. Cages are too small and the animals are deprived of social interaction (59). Three examples of the use of scientific research on animals are the Draize test, LD/50 test, and toy tests. The Draize test is the most common procedure to test for irritation. Animals used in this test are rabbits, mainly due to their extremely sensitive eyes. Because rabbits have no tear ducts, it makes it easier for scientists to observe because the rabbits cannot wash test materials out of their eyes. In performing this test, a rabbit’s head is placed in stock to prevent the animal from scratching or pawing at the eye in which a substance has been placed. The lower lid of one eye is pulled down and away from the eye. Then, the test substance such as nail polish remover, shampoo, or mascara is dropped into or smeared on the eye. The other eye acts as a control. Testers look for redness in the affected eye, swelling, and other signs of irritation. Corneal ulcers and blindness are often the result. After the test, the rabbits are either killed or used in another test (McCoy 47). The LD/50 test was developed in England in 1927, by a mathematician. This test is often criticized as unreliable and cruel. The objective of this test is to measure how much of a chemical is required to cause death. The majority of animals used in this test are dogs, rats, hamsters and guinea pigs. In just one single test, up to 200 animals may be used. Laboratory animals are force-fed toxic substances by a stomach tube. Then the animals are observed for two weeks or until death. The animals that survive are usually killed later, as if it’s nothing. Other procedures include the inhalation of a chemical or substance. Animals are forced to breathe the vapor or powder of a chemical or substance. Sometimes, these chemicals are applied to the skin of an animal. In all these tests, observers look for signs of poisoning, bleeding from the eyes, nose, or mouth, difficulty in breathing, tremors, paralysis, and coma (McCoy 106). Toys are often needlessly tested on animals to determine their safety. To test toy guns, manufacturers point the guns in animals’ faces and see if the plastic pieces discharged hurt the animal. Substances like modeling clay are force-fed to animals to test its toxicity. Other tests involve dropping toys on animals to see if any parts hurt them. Not only are these tests cruel, they are unnecessary. Most toy companies have new high-tech methods of testing their toys for safety without harming animals (Various Authors, 61). Animals weren’t created to entertain. Examples of this are the zoos, circuses, and rodeos. At zoos, large captive animals pace back and forth in small pens and other animals just lie around in their cages bored. Many healthy animals are snatched out of their natural habitats and brutally transferred to a cage, where they are prevented from following their most basic instincts, such as gathering food. When capturing chimpanzees, poachers usually shoot the mother and kidnap the child. After all this, statistics show that only one in ten baby chimps survive the journey to the zoo. Zoo animals also suffer from mistreatment. They lack privacy and cannot live according to their natural needs. Aquatic animals have very little water, animals that once lived in herds are alone, and animals of all types are prevented from natural mating, flying, running, climbing, and other instinctive behaviors. Animals bred in zoos are often sold to laboratories for experiments or to circuses. Some zoo animals end up in â€Å"wild game† parks or hunting preserves; where people pay thousands of dollars to shoot a lion or tiger at point-blank range (Various Authors, 64). Both the Draize test and LD/50 test should be banned. They are not only inaccurate, but the Humane Society of the United States stated that its results are of little value in diagnosis and treatment (McCoy, 49). The toy tests should just be completely banned because it is just plain mean and pointless. Many people don’t realize this but circuses are one of the greatest examples of people’s cruelty to animals. Not only are circus animals taken out of their natural habitats, they are confined in cramped cages. Sometimes they have inadequate food and drinking water. When it comes to training, they endure tight collars/muzzles and are whipped, prodded to perform senseless tricks for the sake of entertainment. Some circus animals are drugged to make them more obedient, and others have their teeth and claws removed. When circus animals have outlived their usefulness, they are usually sold to zoos, private collectors, game farms, or research laboratories. They don’t get a moment of peace, even after they are done performing (Various Authors, 65). Rodeos are basically defined as a demonstration of a person’s domination over an innocent animal, rather than their skill in riding. Rodeo animals suffer a lifetime of stress by being transported from one rodeo to another. These animals are captive performers, housed in tiny trailers and pens, then whipped into frenzy for the sake of a show. Electric prods, sticks, painful ointments, and other devices are used to enrage animals and keep them in line. Many suffer severe bruising, neck and back injuries, internal hemorrhaging, and broken bones. Several rodeos don’t even offer veterinary care to animals, which often undergo open wounds, skin infections, cracked hooves, and other maladies (Various Authors, 66). There are various and simple preventions to help stop animal cruelty. One being PETA; one of the many organizations for animal rights. PETA is responsible for ending the use of the Draize test. Their tactics consists of organizing boycotts, promoting shareholder resolutions and alerting the general public (McCoy, 47). Although the federal Animal Welfare Act was created, the animals being researched in laboratories receive little protection under this act because the United States Department of Agriculture does an inadequate job of inspecting animal research facilities, and an even worse job enforcing the law when violations are found. If this act is taken seriously, there would be fewer problems. There are countless alternatives to scientific research including non-animal laboratory tests, clinical tests on human beings, cell and tissue cultures in vitro; microorganisms and other species believed to have limited or no feeling for pain or suffering. There is also a large data base of ingredients and products that have been previously tested, as well as computer models that can provide answers in research procedures or techniques. This alternative would involve fewer animals per experiment/study and that leads to less pain and discomfort (McCoy, 52). Another easy prevention is education. Respect for animals is learned, not inborn. In reality, children have complex feeling about animals, including fear, and the potential to be cruel. Children need adults’ guidance and supervision when it comes to animals. It’s hard for children to understand because children are exposed at a young age, the stereotype of how animals are. Dogs, cats, rabbits are often portrayed as the good ones, while snakes, bears, and cheetahs are seen as the dangerous, bad guys. Despite these stereotypes, all animals are equal and should have the chance to be treated fairly. Other ways to teach children to be kind to animals are writing letters to companies that test on animals, and reading books about friendly animals (Harnack, 89). All these preventions are straightforward and simple to follow. Animal cruelty is an ongoing problem that many people disregard in today’s society. It is mainly caused by the use, neglect, and intentional mistreatment of animals, all of which can still be prevented by stricter laws, awareness, and education. Clearly, empathy is no longer understood or experienced. It is not too late to help animals who suffer every moment of their lives in unethical experiments and abuse inflicted on by humans.

French Past Imperative - Impératif passé

The French past imperative is very rare  because its usage is restricted to a single situation: it gives a command for something that must be done before a certain time.  Ã‚  Ã‚  Aie à ©crit ce rapport demain.  Ã‚  Ã‚  Have this report written by tomorrow.If you obey the instructions in the above example, when tomorrow comes the report will already be written, so the writing of it will be in the past, ergo, the past imperative. If you use the regular imperative, Écris ce rapport demain, the report wont yet be written when tomorrow rolls around: in accordance with the command, you will be writing it tomorrow. On the other hand, the careful use of a preposition can make all the difference - you could just say Écris ce rapport avant demain and avoid the past imperative altogether - probably another reason that it is so rare.  Ã‚  Ã‚  Soyez partis à   midi.  Ã‚  Ã‚  Leave / Be gone by noon.  Ã‚  Ã‚  Ayons fini les devoirs à   7h00.  Ã‚  Ã‚  Lets have our homework done by 7:00.The past imperative is kind of similar in nuance to the past infinitive, except that it indicates a command rather than a statement of fact.br/>Because the past imperative is so rare, theres really no need to learn how to use it, but you should be able to recognize it. How to Conjugate the Past Imperative The past imperative is a  compound conjugation, which means it has two parts: imperative  of the  auxiliary verb  (either  avoir  or  Ãƒ ªtre)past participle  of the main verb Note:  Like all French compound conjugations, the past imperative may be subject to  grammatical  agreement: When the auxiliary verb is  Ãƒ ªtre, the past participle must agree with the subjectWhen the auxiliary verb is  avoir, the past participle may have to agree with its direct object As with the present imperative, the past imperative has conjugations for only three grammatical persons:  tu,  nous, and  vous. Pronoun parler choisir avoir tre (tu) aie parl aie choisi aie eu aie t (nous) ayons parl ayons choisi ayons eu ayons t (vous) ayez parl ayez choisi ayez eu ayez t Pronoun sortir descendre aller venir (tu) sois sorti(e) sois descendu(e) sois all(e) sois venu(e) (nous) soyons sorti(e)s soyons descendu(e)s soyons all(e)s soyons venu(e)s (vous) soyez sorti(e)(s) soyez descendu(e)(s) soyez all(e)(s) soyez venu(e)(s)

Cultural Diversity And Its Influence On Nursing Practice...

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