Changes in accounting and disclosure under the German Sustainability Code

After years of waiting, the Sustainability Reporting Act (NaBeG) came into force on 19 February 2026. The NaBeG has been discussed for a long time, particularly with regard to the implementation of the Corporate Sustainability Reporting Directive (CSRD), which is leading to massive impacts on sustainability reporting. However, the NaBeG also brings some changes and tightening in terms of accounting and disclosure.

First of all: some of the amendments still included in the draft for consultation – which have also been reported in the media – are no longer included in the final text of the legislation. The proposed obligation for holding companies (GmbHs) to determine their size category on the basis of consolidated thresholds will not be introduced and remains restricted to public limited companies (Aktiengesellschaften) only. As a result, in many cases there will still be no obligation to have the annual accounts of the holding GmbH audited, even if it has significant subsidiaries. Nor has the increase in administrative fines for the late disclosure of annual accounts been implemented; this would have resulted in a penalty of up to 5 % of annual turnover in the event of repeated breaches. However, the criminal offences relating to other disclosure breaches have been implemented.

In accounting, for financial years beginning after 31 December 2026, the discount (Disagio) will be abolished and replaced by the effective interest method, which is already established in international accounting. Expenses directly related to the raising of debt capital (e.g. loan arrangement fees, discount, one-off charges, etc.) must be recognised as expenses over the term. Insignificant amounts can be recognised as expenses immediately. This will also align the accounting law approach with the tax approach, according to which the costs of raising finance had to be spread over the term until now. A discount already capitalised from previous periods may be continued.

Companies that are required to produce a sustainability report must include the most important intangible resources (e.g. internally generated intangible assets, employees, customer relationships, etc.) in their management report. For the time being, this obligation is limited to listed companies with more than 500 employees.

Elimination of the signature requirement: It continues to apply that entrepreneurs must document the date of preparation and the prepared version of the annual or consolidated financial statements. This documentation can continue to be done with a signature. However, the signature does not necessarily have to be affixed to the annual financial statements if other measures ensure that the prepared annual financial statements cannot be altered. This can be done, for example, by generating a code ("hash value") which ensures that the electronic version of the documents can only be altered by outputting a different code, and this code is signed. Whether this approach will ultimately prevail in practice remains to be seen.

Regarding disclosure obligations, the following changes are made:

• When disclosing, it must be stated whether group accounting obligations exist.,
• whether a consolidated sustainability report needs to be prepared,
• whether a consolidated corporate governance report was to be prepared or
• to prepare a report on payments to government bodies.

For submissions from 1st July 2026, legal representatives must also state the size class into which the company is to be classified in the financial year and whether the company was capital market-oriented or another entity of public interest in the financial year.

Violations are subject to stricter penalty provisions. In this regard, the following new offences exist:

• Breaches of the post-reporting submission schedule,
• Breaches of disclosures regarding the waiver of inclusion of subsidiaries in the group appendix.,
• Breaches of the disclosures regarding the equity statement in the consolidated financial statements,
• Breaches of the self-classification statements for the annual or consolidated financial statements.

The penalty amounts are up to €7,000 for medium-sized and large public limited companies and up to €3,600 for small public limited companies. In the event of repeated default, the penalty framework can increase to up to €20,000 for small and medium-sized public limited companies and up to €50,000 for large public limited companies, respectively. The new regulations on penalty provisions are to be applied for the first time to documents concerning a financial year-end date after 31 March 2026.

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