Please note that our posting here is not a comprehensive handling of the topic of IT Governance but is intended rather to alert interested readers to a burgeoning field which impacts law, especially on the example of Germany. It is best to follow some of the links given below for more information.
Information technology governance (“IT governance”) is a burgeoning field, as can be read for example at the IT Governance Roundtable of the IT Governance Institute. For a general overview of IT governance, see CIO.com’s ABC: An Introduction to IT Governance by Karen D. Schwartz, for IT Governance in Practice see that PWC report, and for a prospective view to 2008 see IT and the Changing Privacy Landscape: Eight Areas to Watch in ’08 by Brian Tretick, executive director, Privacy Risk Advisory Services at Ernst & Young, December 28, 2007.
We were led to this topic for Germany via Overcoming the Thicket: Five Steps Toward Successful Post-Merger IT Restructuring in Germany, a September 2007 article by Jyn Schultze-Melling LL.M in Law Technology Today, the webzine of the ABA Law Practice Management Section.
As Schultze-Melling notes in his article, the legal framework governing corporate IT in Germany has become rather long and complex. For example, as he writes, one must be familiar inter alia with the following important German regulations:
1) Grundsätze ordnungsmäßiger DV-gestützter Buchführungssysteme (GoBS)
translated inter alia as “Generally Accepted Principles of Computer-Assisted Accounting Systems” (GAPCAS) or also as “Generally accepted principles of computerized accounting systems” – see the German text of this administrative instruction as issued by the German Finance Ministry in 1995 (Schreiben des Bundesministeriums der Finanzen an die obersten Finanzbehörden der Länder vom 7. November 1995 – IV A 8 – S 0316 – 52/95- BStBl 1995 I S. 738)
2) (Grundsätze zum Datenzugriff und zur Prüfbarkeit digitaler Unterlagen) – GDPdU
translated inter alia as “Principles of data access and auditing of digital documents”
which is an administrative instruction from the German Finance Ministry issued in 2001 (BMF-Schreiben vom 16. Juli 2001 – IV D 2 – S 0316 – 136/01 -).
As far as the problem of divining German accounting principles, see for a useful, thoughtful presentation the article
German Financial Accounting and Reporting FAQs and Fallacies by Robin Bonthrone
where he writes clear back in the year 2000 (this is but a small part of his article):
Section 243 (1) of the HGB sets out that financial statements must be prepared in accordance with the GoB (“Der Jahresabschluß ist nach den Grundsätzen ordnungsmäßiger Buchführung aufzustellen”). The problem is that these GoB are not actually defined anywhere! Born (Rechnungslegung International—Konzernabschlüsse nach IAS, US-GAAP, HGB und EG-Richtlinien, 2. Auflage; Schäffer-Poeschel 1999) refers to them as ein unbestimmter Rechtsbegriff. According to the Wirtschaftsprüfer-Handbuch 1996, the following may be considered part of the GoB:
- Commercial and tax laws (e.g. HGB, AktG, EStG, EstR, GmbHG) and EC Directives, in particular the 4th (annual accounts) and 7th (consolidated accounts) Directives
- Rulings by the BGH (Bundesgerichtshof/Federal Court of Justice), BFH (Bundesfinanzhof/Federal Finance Court) and the ECJ (European Court of Justice)
- Opinions and statements issued by the IDW (Institut der Wirtschaftsprüfer/German Institute of Auditors), opinions issued by the DIHT (Deutscher Industrie- und Handelstag/German Industrial Trade Association)
- gesicherte Erkenntnisse der Betriebswirtschaftslehre (undefined)
- The relevant professional literature (again undefined)
- and finally, what I think must qualify as one of the great Gummibegriffe of all time: die Bilanzierungspraxis ordentlicher Kaufleute
Take a look at the entire writing by Robin Bonthrone.
Confirming the existence of those same problems currently, we find the following reference at the SAP website in note 36 to the Consolidated Financial Statements 2006 regarding significant differences between German and U.S. accounting principles:
“Because SAP AG is a German holding corporation that owns the majority of voting rights in other enterprises, it is generally obliged to prepare consolidated financial statements in accordance with the accounting regulations set out in the German Commercial Code (Handelsgesetzbuch – HGB). The German Commercial Code Implementation Act (Einführungsgesetz zum HGB-EGHGB), section 58 paragraph 5 and the German Commercial Code (Handelsgesetzbuch – HGB), section 292a, offer an exemption from this obligation if consolidated financial statements are prepared and published in accordance with an internationally accepted accounting principle (such as U.S. GAAP or IFRS). To make use of this exemption, we are required to describe the significant differences between the accounting methods applied and German accounting methods.“
Take a look at that website for more detailed information.
The website IAS Plus from Deloitte covers Accounting Standards Updates by Jurisdiction – in this case Germany and points there to pending legislation which involves forthcoming major changes in German accounting law as follows:
“Major changes in German accounting law are under discussion
On 8 November 2007, the German Ministry of Justice (MOJ) issued for public comment a staff draft of the German Accounting Law Modernisation Act (BilMoG) (PDF 651k, German language). The overall goals of the reform are to (1) modernise the German Accounting Law (Handelsgesetzbuch, or HGB) and (2) reduce regulatory burden on companies. The proposed changes are generally in the direction of closer conformity of the HGB with IFRSs. The bill would also make changes in the areas of auditing, supervisory boards, and audit committees. Importantaccounting changes include:
- greater recognition of intangible assets (although the related increase in equity would not be available for distrbution as dividends)
- special purpose entities controlled by a parent would have to be consolidated
- recognition of deferred tax assets (previously prohibited)
- measurement of financial assets held for trading at fair values in excess of initially recognised costs
- measurement of provisions at discounted amounts
- inclusion of actuarial assumptions in the measurement of pension liabilities
- exemption of small non-listed entities from the requirement to publish HGB-GAAP financial statements
The staff draft is currently out for comment by key interested parties until 8 January 2008. Thereafter, the draft law will be revised based on the comments received by MOJ and then submitted to both chambers of Parliament (the Deutsche Bundestag and Bundesrat) where it will be deliberated for at least several months. Many observers anticipate a heated debate. The original time frame indicated by the MOJ was for publication of the final law in the second half of 2008, with applicability as of 1 January 2009. However, observers suggest that due to significant election dates in 2008 and 2009, that date may not be feasible to uphold.“
[emphasis added by LawPundit]
– Five Domains of Internet Technology Governance for Consideration by Boards of Directors by Matthew Fletcher, June, 2006
IT Jobs in the UK – Trend, 2007
It Governance in Higher Education – Educause, September, 2007