Abstract
Small- and medium-sized enterprises (SMEs) are the backbone of the German economy. As accounting and disclosure rules are tied to legal form and size, SMEs face less strict requirements. Most SMEs are managed by their owners, and also the ‘bigger’ medium-sized enterprises are majority-owned by families. Therefore, German SMEs are reluctant to disclose information voluntarily. This provides SMEs in Germany with less incentives to adopt integrated reporting. Limited empirical evidence on integrated reporting is available and focuses only on listed corporations. Nonetheless, integrated reporting can be beneficial for SMEs as our analysis shows. Despite the current absence of legal requirements to implement more sophisticated reporting approaches, we identify political and social factors that render more enhanced reporting systems useful as numerous stakeholders demand more extensive information on environmental, social and governance issues. Furthermore, integrated reporting enables SMEs to create integrated information systems not only for external reporting but far more to improve internal processes and internal decision making.
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Notes
- 1.
The Accounting Standards Committee of Germany (ASCG) is an independent and not-for-profit association. It serves as the national standard setter in the area of group financial reporting in Germany and develops the German Accounting Standards. The ASCG has been acknowledged as the private standardization organization pursuant to § 342 GCC. The German Accounting Standards provide guidance and interpretation for the accounting rules codified in the German Commercial Code. According to § 342 GCC, financial statements prepared in accordance with German Accounting Standards meet all GAAP requirements. See www.drsc.de
- 2.
§ 289b (2) GCC and § 315b (2) GCC exempt public interest entities from disclosing a non-financial declaration under certain requirements, e.g. if an entity is included in a group report and a separate non-financial declaration for the group is disclosed.
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Schorn, P., Tempel, A., Bauer, R., Klapdor, R. (2021). SMEs and IR: Evidence from Germany. In: Dyczkowska, J., Szirmai Madarasine, A., Tiron-Tudor, A. (eds) Development of Integrated Reporting in the SME Sector. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-030-81903-3_2
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