Corporate governance and earnings management ... - CEREG

In spite of the preventions of a large part of the major actors of the German doctrine such as
Busse von Colbe (2001, p. 879) and Hommel, (2001, p. 1943), and, more largely the majority
of the members of the Scientific Committee for Accounting (according to Siegel, 2002, p.
749), the DSR, after an “animated debate”, published in 2002 the DSR1a (DSR, 2002)
specifying that the new American doctrine on goodwill did not prevent the adoption of the
FASB’s standards as a substitute for the GoB. Moreover it maintained the DSR4 in the same
state as before. These decisions had the effect of a bomb in Germany. Very rare were the
professors who as Zimmerman (2002) defended the position of the DSR. The most moderate
of the commentators did not fail to underline the totally contradictory character of the two
standards and the apparent illegality of the adopted American rule as referred to the texts of
the seventh directive and the GoB (Krawitz cited in Siegel, 2002, p. 749; Duhr, 2003, p. 974).
Busse von Colbe (2004), in a very clear synthesis, deals with the “application of American
criteria from a German perspective”. Moxter (2001, p. 1) referring to Louis XIV ascertained
that in violating the text of the European Directive (that provides for a systematic
amortization) the DSR had acted according to its “bon plaisir”. The partisans of the traditional
prudent approach denounced an “insane” way of capitalization which allowed for the
registration of a part of the created goodwill (Siegel, 2002, p. 749) and opened the road for an
“Enronisation” of the German accounting (Schildbach, 2005, p. 1). The only hope that
remains for these numerous opponents was the possibility of a veto by the Ministry of Justice.
Unfortunately for them the text of the DSR was ratified on the 6 of April 2002
(Bundesanzeiger).
It can be concluded that the case of goodwill has been played in very dramatic conditions in
Germany. While the majority of the enterprises were preferring a weakened static solution the
fringe of companies mostly vested in the globalisation, sustained by the Chamber of public
accountants, a part of the doctrine and the new DSR, wished to align, for the sake of
international credibility and financing problems, on the dynamic solutions proposed by the
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