The Impact of Tax Rules on Financial Reporting in Germany, France, and the UK

Abstract

The paper examines the influence of tax rules on the financial statements of a company. An analysis of differences between tax reporting and commercial reporting in Germany, France and the UK shows that these differences lead to distorting effects with respect to the comparability of statements of companies from different countries, and with respect to non-compliance with the true and fair view requirement in cases where such influence of tax rules on the financial statements actually occurs. The comparison is conveyed with a view to the fourth EC company law directive, which itself does not take a position for or against the influence of tax rules. The strong influence of tax rules on the commercial accounts in Germany, in contrast to the UK, where such influence is minimal, and the moderate approach of France, which stands in between the two other countries, is discussed. The different approaches of the three countries can be considered an obstacle to comparability. In the opinion of the author, the required information in the notes on the influence of tax provisions does not compensate for the shortcomings of the influence of tax rules on the annual accounts of companies.