Formal balance sheet analysis

Definition of formal balance sheet analysis

The formal balance sheet analysis is used to determine whether the balance sheets, including P&L statements, appendix and, if necessary, management reports comply with the legal requirements.

 Principles of formal balance sheet analysis:

  • Principles of proper bookkeeping (§§ 238 and 239 HGB)
  • Principles of proper inventory (§§ 240 and 241 HGB)
  • Principles of proper accounting and valuation (§§ 242 to 256 HGB), the most important of which are the clarity, truth, continuity and identity of the balance sheet.

supplementary regulations

In addition, there are the supplementary provisions of Sections 264 to 289 of the German Commercial Code (HGB) for the annual financial statements and management report of corporations:

  • General standard in Section 264, Paragraph 2, Clause 1 of the German Commercial Code
  • General principles of the structure (§ 265 HGB)
  • Structure of the balance sheet (§ 266 HGB) and income statement (§ 275 HGB)
  • Regulations on the items of the balance sheet (§§ 268 to 274 HGB) and income statement (§ 277 HGB)
  • Regulations on depreciation and write-ups (§§ 279 to 282 HGB)
  • Regulations on the information in the appendix (Sections 284 to 288 HGB)
  • Regulations on the content of the management report (Section 289 HGB).

It is difficult for an external balance sheet analyst to be able to check the formal correctness of the annual financial statements from all points of view, unless the annual financial statements are published in accordance with the HGB and PublG, which in the case of medium-sized and large corporations together with the management report pursuant to Section 315 HGB to be examined by an auditor to ensure that it is correct (Section 316 HGB).

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