IFRS is a globally accepted, principles-based framework focusing on fair value and economic substance, while German GAAP (HGB) is a more conservative, rules-based system emphasizing legal form and historical cost.
Key Differences:
1. Principles vs. Rules: IFRS is more principles-based, focusing on the economic substance of transactions, while HGB is rules-based, emphasizing legal form and conservatism.
2. Fair Value: IFRS favors fair value accounting, particularly for financial instruments, while HGB generally emphasizes historical cost.
3. Consolidation: IFRS is more extensive in its approach to consolidation, whereas HGB applies stricter rules, with smaller entities often exempt from full consolidation.
