Is it all sales revenue? Changes to the income statement due to the German Accounting Directive Implementation Act (BilRUG)

The German Accounting Directive Implementation Act (BilRUG) passed by the German parliament on June 18, 2015 provides for a change to the items in the income statement. As a result, sales revenue are redefined and extraordinary expenses and income are no longer separately posted in the income statement.

New definition of sales revenue

According to the previous regulation of § 277 par. 1 of the German Commercial Code (HGB), the item of sales revenue is defined as income from the sale or renting or leasing of typical goods and products in the course of the ordinary business activity of the company and also for typical services in the course of the ordinary business activity of the company after deduction of sales deductions and sales tax. The old regulation limits sales revenue to typical transactions in the course of ordinary business activity. The definition according to the new law removes this limitation and defines sales revenue as income from the sale, renting or leasing of products or from the provision of services of the company after deduction of sales deductions, sales tax and other direct taxes linked to the sales.
According to the new regulation, in future all income from products and services is to be disclosed as sales revenue. This can lead to a reclassification of the income from secondary activities (e.g. administrative overheads of group companies, canteen revenue, income from the sale of scrap, loan of personnel, etc.) into the sales revenue which up to now was posted under other operational expenses.
This may lead to distinguishing difficulties with the definition of products and services. Does the sale of a system which was constructed and used by the company (owner) constitute the sale of a product which is to be posted as sales revenue or not? In addition, the new definition can lead to a distortion of performance indicators relevant for sales revenue. In our opinion, it would be consistent and appropriate to correspondingly do without the item of other operational expenses. With the application of the total cost of sales method a corresponding adjustment of production costs should also have to be made and with the total cost method a relocation to the material and personnel expenses should be made.
The new definition constitutes a significant change to the previous regulation and leads to considerable reorganisation expenses for companies because a new account allocation and corresponding adjustments to the reporting have to be made.
Furthermore, the new regulations of the HGB lead to differences in comparison to the international accounting standards according to IFRS and US-GAAP. This results in a limitation of comparability.

Elimination of extraordinary expenses and income

The previous posting regulations concerning extraordinary expenses and income acc. to §277 par. 4 HGB is amended and replaced by the BilRUG. Accordingly, a separate posting of extraordinary expenses and income in the income statement is no longer permitted. This leads to an alignment with international accounting standards due to the fact that IFRS no longer recognises a separate recording of extraordinary expenses and income. A separate posting was also recently eliminated with US-GAAP.
In future, in accordance with § 285 no. 31 HGB-E the amount and type of individual expense and income items of extraordinary size and importance must be recorded in the notes when the amounts are not of a secondary importance. This item, however, does not represent a revival of the cancelled posting in the income statement but explicitly relates to exceptional matters. As the definitions of extraordinary and exceptional are not exactly the same, the amounts which in the past were posted in the income statement will deviate from the amounts listed in future in the notes.

Application rules

The new definition of sales revenue can be applied to financial years which begin on or after January 1, 2014, when simultaneously the application of the changed threshold values for the size categories acc. to §§ 267, 267a Abs.1, 293 HGB-E is also made. Otherwise application for the financial years beginning on or after January 1, 2016 is obligatory.


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