Production costs |
Measure for initial measurement of produced assets (§ 255 sect. 2, 2a and 3). The production costs are calculated as follows: |
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Direct material costs |
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+ Direct manufacturing costs |
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+ Special direct manufacturing costs |
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+ Indirect material costs |
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+ Indirect manufacturing costs |
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+ Adequate part of depreciation/amortization |
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= Mandatory components of production costs |
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+ Adequate part of general administration |
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+ Adequate part of voluntary social benefits |
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+ Adequate part of voluntary pension scheme |
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+ Borrowing costs (only if directly related to production process) |
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= Maximum of production costs |
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The options can be used only in an identical way for commercial and tax purposes. |
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Any indirect costs must constitute an adequate part related to the specific production process, i.e. without impairment, idle time costs or extraordinary items. |
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Distribution costs, research costs or imputed costs may not be included. |
Provisions |
Liabilities that are uncertain concerning the reason for the liability or the amount necessary to fulfil the obligation are called provisions. |
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If pending transactions become disadvantageous and will probably result in a loss, a provision for onerous contracts must be recognized. |
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A specific topic in German GAAP are the provisions for omitted maintenance and waste disposal that must be recognized under certain conditions. |
Realization principle |
Subprinciple of principle of prudence; states that any income/gain can be recognized only when it is realized (§ 252 sect. 1 no. 4). Realization criteria follow the completed contract method (see there). |
Recognition |
Including a transaction as an asset or liability in the balance sheet is called recognizing the transaction. |
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It is the first step in deciding about the accounting for a specific transaction. The subsequent steps are decisions about the measurement and presentation of the transaction. |
Settlement amount |
Measure for initial measurement of liabilities. The amount that is required to fulfil the obligation. |