Prepaid expenses and deferred charges and substantiality in German accounting

The Financial Court of Baden-Württemberg has ruled in a new judgement (02.03.2019, 5 K 548/17) that there is no obligation for the recording of non-substantial amounts as prepaid expenses and deferred charges. As non-substantiality limit is considered the amount for the immediate depreciation of fixed assets. Background to the lawsuit were non-substantial or annually recurring amounts such as vehicle tax, motor insurance, etc.

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In practice, this means that the effort and expense of preparing the annual financial statements can be significantly reduced. Prepaid expenses and deferred charges are calculated in accordance with applicable German tax law periodically (on a day-to-day basis), up to now including small amounts, which requires considerable efforts and costs for documentation. In principle, all expenses must be allocated to the respective fiscal year in accordance with the German accounting regulations.
The tax office has submitted an appeal so that the German Federal Finance Court must now ultimately decide on it.

Postponement of priority declaration and ban on recognising provisions for anticipated losses for German corporations

Loss deduction for German corporations after change of shareholders