Assets are not only important to you as an entrepreneur. Assets also play an important role in your balance sheet and you differentiate between fixed and current assets . For certain assets, however, there is also the so-called activation obligation for you as an entrepreneur. You can find out what this is all about in the following article.
What does mandatory activation mean?
In balance sheet accounting, the activation obligation is understood to be a requirement. This requirement according to Section 246 of the German Commercial Code (HGB) stipulates that you must show all assets of your company and also the prepaid expenses on the assets side of your balance sheet by the balance sheet date . The obligation to activate applies to all assets for which your company still has value beyond the accounting period . With this activation obligation, the legislature wants to prevent you from being able to write off all assets completely within one financial year.
Which legal bases do you have to consider when it comes to the activation obligation?
With the activation obligation you have to observe certain legal bases. All these principles are described in detail by the legislator in Section 246 (1) of the German Commercial Code. There is also a list of everything that falls under this activation obligation. The activation obligation applies to the following items.
- All of your company’s assets
- any debts your company has
- the company’s derivative value is part of the activation obligation
- all active prepaid expenses are to be capitalized
If there are no legal regulations that say otherwise, you must always show these items in the balance sheet. Different regulations by the legislator are referred to as activation bans in this context .
The activation obligation is not the only requirement that you have to observe in your balance sheet accounting. So that you don’t lose track of your bookkeeping and handle it correctly, GoBD-compliant bookkeeping software is the ideal solution!
What is the basic activation ability?
The activation obligation in the context of the balance sheet is quite a complex construct. Therefore, you must first understand what a basic activation ability is. This means that it must be checked whether certain assets or debts can even be accounted for. In terms of the basic ability to be activated, a distinction is made between the abstract and the concrete accounting ability .
|Abstract accounting ability||Concrete accounting ability|
|The abstract accounting ability describes that it is necessary to check which requirements you have to meet in order to determine whether there is a debt or an asset.||In the concrete accounting ability, however, the HGB defines exactly which standards or circumstances exist that make a deviation from the abstract accounting ability possible. To put it simply, you have what is known as the right to vote here. These options are granted to you as an entrepreneur and offer you the option of using certain leeway in accounting policy according to your individual ideas.|
Which things of you are affected by the activation obligation?
|You are required to activate all assets.||In § 246 para. 1 sentence 2 HGB is described that expel any asset in principle and should be accounted for.|
|Active prepaid expenses||The activation obligation for RAP is described in Section 250 Paragraph 1 Clause 1 of the German Commercial Code (HGB ).|
|In the case of derivative goodwill , a distinction is made between independently generated goodwill, original goodwill and derivative goodwill. For you and the balance sheet, only the derivative goodwill is significant.||The obligation to capitalize derivative goodwill is described in Section 246, Paragraph 1, Clause 4 of the German Commercial Code ( HGB).|
What do activation options mean for you?
The legislature grants you a so-called activation option for various different situations . This means that as an entrepreneur you have a margin of maneuver. With this leeway, you can decide for yourself whether you want to show a certain asset on your balance sheet or not. However, this only applies to the following assets.
|Deferred tax assets : These taxes always arise when an asset has to be assessed differently from its value, because the procedure is between commercial law and tax law.||The capitalization option for deferred tax assets is regulated in Section 274 (1) sentence 2 of the German Commercial Code ( HGB ).|
|Discounts: A discount always relates to the difference between an issue amount and a return amount. This can be the case, for example, with a bond.||The activation option for discounts, for example in connection with a financial transaction, is also regulated in Section 274 (1) sentence 2 HGB.|
What do you need to know about activation bans?
The legislator not only stipulated the activation obligation. There is also the counterpart to this and this is called an activation ban. For you, this means that there are certain assets that you are not allowed to show on the balance sheet. The following items are affected by the activation ban.
|Self-created brands, logos, databases, etc.||The prohibition to activate these items is described in Section 248 (2) of the German Commercial Code. The reason for this activation prohibition is primarily a non-transparent basis for the assessment.|
|Intangible assets||This activation prohibition is described in Section 255, Paragraph 2a, Clause 4 of the German Commercial Code. However, you have to note that this prohibition only applies if the costs for development and research have not been recorded separately in advance.|
|Research costs||In principle, all costs incurred for research are affected by the activation ban. This is regulated in Section 255, Paragraph 2, Clause 4 of the German Commercial Code (HGB)|
In a nutshell: frequently asked questions on the subject of mandatory activation
What does activate something mean?
Activating something is the inclusion of an asset on the asset side of the balance sheet. There is an obligation to activate certain assets.
What are ancillary acquisition costs?
Ancillary acquisition costs are costs or expenses that are incurred in addition to the acquisition price for the acquisition of an asset. Incidental acquisition costs can arise before, after or during an acquisition and must be capitalized with the asset.
What are fixed assets?
The assets is a part of the balance sheet . Fixed assets include intangible assets such as licenses, patents, etc. Tangible assets such as land, office equipment, vehicles, etc. are also assigned to fixed assets.
At the end of the year, some companies, depending on their legal form , have to draw up a balance sheet. Before individual balance sheet items are assessed, you have to ask yourself whether they can be accounted for. You are required to activate certain assets.
In addition to the activation obligation, you also have to distinguish between activation rights and activation prohibitions. The capitalization requirement means that all assets and prepaid expenses must be shown on the assets side of the balance sheet as of the balance sheet date. This is regulated in § 246 HGB. In the commercial and tax balance sheet, the obligation to capitalize has the consequence that the result increases. This is due to the fact that you cannot completely write off any expenses of a fiscal year .