Frankfurt, Germany

Questions of Doubt Concerning the (Tax) Accounting Implications of the Coronavirus

By Oliver Biernat, Benefitax GmbH

COVID-19 effects have led to a number of questions of doubt when preparing annual financial statements and tax declarations. Here are some answers for Germany (but be aware that other solutions may apply in other countries):

Referring to the impairment of depreciable fixed assets, a depreciation obligation only exists in case of expected permanent impairment. This is the case if the value on the balance sheet date is below the scheduled amortised residual book value for more than half of the remaining useful life or at least five years.

When it comes to the valuation of inventories, no inclusion of idle capacity costs (overheads during production stoppages) are allowed in the cost of production.

It has to be checked whether provisions for impending losses must be formed if promised deliveries/ services cannot be made (e.g. due to own production standstill or at the supplier’s premises). Unscheduled write-downs to the residual book value of goodwill are to be made at the latest from the balance sheet date 31 March 2020 (but not on 31 December 2019), if future profit value is permanently lost due the pandemic.

Explanations must be included in the notes to the financial statements only if the company is affected by COVID-19 and this has an impact on future development, e.g. if there are risks that could jeopardise the company’s continued existence.

In the risk report of the management report, a reporting obligation generally exists if possible future developments could lead to negative deviations from forecasts or targets of the company. If the pandemic led to a significant individual risk and otherwise no accurate picture of the group’s risk situation is conveyed, in particular, risks to the continued existence of the company as a going concern must be reported. In the forecast report, companies need to make comparative forecasts or to present them in various forms in the event of special circumstances like the coronavirus (i.e. “unusually high uncertainty”); a complete waiver of the forecast reporting is not permitted.

Oliver Biernat

Oliver Biernat

GGI member firm
Benefitax GmbH Steuerberatungsgesellschaft Wirtschaftsprüfungsgesellschaft
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
Frankfurt am Main, Germany
Frankfurt am Main, Germany T: +49 69 256 227 60
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Benefitax GmbH Steuerberatungsgesellschaft Wirtschaftsprüfungsgesellschaft is a tax consultancy and public auditing company located in Frankfurt, which is widely recognised as the financial centre of Germany. Benefitax predominantly serves German entities of foreign multinational groups, mid-sized German companies with cross-border activities, and wealthy private individuals.

Oliver Biernat is the Founder and Managing Partner of Benefitax. He is a German chartered accountant, certified tax advisor, and specialist advisor for international taxation, with more than 20 years of experience. Since 2008, he has chaired GGI’s International Taxation Practice Group (ITPG), increasing its size to more than 570 experts from 90 countries in the process.

Published: International Taxation Newsletter, No. 13, Autumn 2020 l Photo: Branko Srot -

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