what is handelsgesetzbuch hgb 
handelsgesetzbuch hgb is the law that governs the primary commercial code for companies in germany the law includes a regulation related to the preparation of financial statements and establishes accounting guidelines and best practices 1 hgb is similar to generally accepted accounting principles gaap in the united states understanding handelsgesetzbuch hgb the commercial code of germany known as handelsgesetzbuch hgb was first established on may 10 1897 2 in 1998 the code was adapted to conform to new laws within the european community hgb was also been used in austria from 1938 until 2007 when it was replaced by a newer unified commercial code called unternehmensgesetzbuch ugb 3 german accounting law was further updated in 2010 with bilanzrechtsmodernisierungsgesetz bilmog 4hgb governs the registration of companies in germany and the ordinances they must adhere to for example hgb includes provisions on the use of commercial brokers agents and the formation and dissolution of partnerships with third parties 5the mandates of hgb include paying employees salaries by the end of each month under the law non compete clauses in employees hiring contracts must be outlined in writing there are also provisions regarding charter contracts for ships and salvage rights hgb is sometimes referred to as german gaap handelsgesetzbuch hgb vs ifrsgermany s commercial code and accounting laws share similarities and differences with international financial reporting standards ifrs for example germany s laws and ifrs both use historical costs as the core of accounting but german law generally does not allow for revaluations 6ifrs allows for the revaluation of the fair value of property intangible assets investment property equipment and inventions within set industries german accounting law does offer some exceptions to the fair value assessment of financial instruments from banks and financial institutions that are held for trading 6income statements are largely similar under either set of accounting laws but differences do exist there is no statement of comprehensive income under german account practices income statements can be issued by using the cost of sales or total cost methods furthermore income drawn from discounting provisions must be included with other interest and similar income 6with ifrs a company can decide to show its income or expenses as a single statement of comprehensive income or as two statements the separate statements can show components of profit or loss plus another statement for other income 6hgb only requires a statement of cash flows for consolidated financial statements and for publicly traded companies that are not required to file consolidated financial statements ifrs and german accounting practices both classify cash flows by operating investment and financing activities 6hgb is comprised of several books that span merchants partnerships trading commercial transactions and maritime transactions hgb and international businesshgb can have relevance and impact on businesses outside of germany that engage in commercial activities with german entities for starters when businesses from different countries engage in contracts or commercial transactions they often specify the governing law in their agreements if a contract involving a german entity designates german law as the governing law hgb s provisions may apply to the interpretation and enforcement of that contract compliance with hgb may also have implications for tax obligations and transfer pricing for international businesses operating in germany as discussed above hgb contains accounting and financial reporting regulations that may impact the financial statements and disclosures of german entities hgb also provides rules and standards for commercial transactions including sales contracts agency agreements and other trade related activities if international businesses engage in such transactions with german partners hgb s provisions may influence contract terms and obligations hgb regulates various types of business entities such as partnerships and corporations when international businesses form joint ventures subsidiaries or other business structures with german entities the legal framework of hgb may apply to those entities plus hgb includes provisions related to commercial agents which can be relevant when foreign companies appoint commercial agents or distributors in germany 