Corporate governance and earnings management ... - CEREG

principally leaning on the fact that the article 255,4.3 allows for a dynamic treatment (in that
sense Söffing, 1988, p. 598). Indeed, since 1956 (and even since 1931, according to several
authors), legal decisions from the BFH had not made of the salability of a good a necessary
condition to its capitalization but the BFH still required the objective separate valuation
(Söffing, 1988, p. 598-599; Moxter, 1993, p. 855; Hommel, 1997, p. 354-361), what Moxter
considered to be a fundamental barrier to the evolution towards the full recognition as an asset
(Moxter, 1993, p. 861; Moxter, 1998, p. 478).
At this stage of the reasoning, we should conclude that, although, from the point of views
of regulation, there is a break-through of the dynamic solution, which constitutes an
undeniable novelty in the German context, the basic solution, ascertained by the dominating
doctrine, remains that one of the classic static conception. This view can be strengthened by
the opinion of those who think, on the basis of legal sources, that the introduction of the
dynamic solution is only due to tax motivations: to permit to the companies to opt for the new
regulation for the amortization of goodwill in 15 years as decided by the tax legislator in 1985
(Söffing, 1988, p. 606-607). But this view must be confronted to the solutions provided for in
matter of consolidated accounts.
b) The case of consolidated financial statements
The treatment of goodwill in consolidated accounts is codified by the article 309-1 of the
Code of Commerce. This article shows two fundamental oddities in comparison with its
equivalent for the individual accounts.
The first novelty, which obligatorily derives from the European text, is that, as a matter of
principle, the goodwill must be (and not may be) capitalized (article 309-1, alinea 1). At first
sight one could think that this difference of writing presages a different treatment from the
one applied to individual accounts. But a second oddity must be taken in account.
The latter lies in the fact that the German legislator has used the flexibility of the article 30
§2 of the seventh directive which permits to the States to authorize the companies to write off
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