Financial modelling for scale-ups entering Europe

1. Introduction: Scaling Beyond Borders in 2026 and 2027

Expanding your scale-up from the Netherlands into Germany or broader Europe offers immense potential. However, moving across borders introduces significant regulatory complexity. You must navigate varying accounting standards, specifically IFRS, Dutch GAAP, and German GAAP.

The German investment climate remains highly attractive for Dutch middle-market entities. Despite economic shifts, the appetite for cross-border investment is high. To succeed, your entity needs accurate financial modelling and a solid grasp of corporate funding requirements.

As we move into the 2026-2027 period, these regulatory foundations become even more critical for your strategic planning. This guide, prepared by NextAccounting, uses the latest regulatory insights to help scale-ups manage this transition. We aim to ensure your financial models are both compliant and optimized for growth.

2. Choosing the Right Framework: IFRS vs. Local GAAP

When you enter new European markets, identifying the correct authoritative literature is your first step. IFRS includes the full body of standards published by the International Accounting Standards Board (IASB).

• German GAAP (HGB/GoB): Governed by the Handelsgesetzbuch and the Grundsätze ordnungsmäßiger Buchführung. It focuses on determining distributable profit and protecting creditors through “prudent accounting.”
• Dutch GAAP (DCC/RJ): Governed by the Dutch Civil Code and the Richtlijnen voor de Jaarverslaggeving. It focuses on a “fair presentation” to provide a true and fair view for stakeholders.
• IFRS: Specifically designed for profit-oriented entities and mandatory for all listed companies within the European Union.

If a specific issue is not covered by the standards, the frameworks handle gaps differently. IFRS and Dutch GAAP provide a clear hierarchy of alternative sources to follow. German GAAP lacks a formal hierarchy, relying instead on well-established literature and German Accounting Standards (GAS) to interpret the law.

3. Navigating Size Criteria and Thresholds for 2026-2027

Size categories determine your reporting and auditing obligations. The “Large” legal entity category carries the most rigorous requirements. Generally, an entity is “Large” if it meets at least two of three criteria for two consecutive years.

Following Commission Delegated Directive (EU) 2023/2775, monetary thresholds have increased by 25%. While these are mandatory for financial years beginning after 31 December 2023, there is a strategic opportunity to consider. You have the option to apply these higher thresholds to financial statements beginning after 31 December 2022.

• Balance Sheet Total: Greater than €25 million.
• Sales Revenue: Greater than €50 million.
• Average Employees: More than 250.

We recommend reviewing your status early. Applying these higher thresholds retrospectively might allow your scale-up to avoid “Large” status and its associated costs sooner.

4. Strategic Consolidation and Exemptions for Scale-ups

Parent companies are usually required to present consolidated financial statements. However, we suggest modelling specific exemptions to optimize your audit and publication costs.

Intermediate Holding Company Exemptions

Under Section 291/292 HGB (Germany) and Article 408 DCC (Netherlands), intermediate holdings may avoid consolidation. This is possible if a higher parent company already prepares equivalent consolidated statements.

• The subsidiary has immaterial significance to the group.
• Significant, ongoing restrictions limit the parent’s control.
• Information cannot be obtained without disproportionate expense or delay.
• The interest is held exclusively for the purpose of disposal.

The Group Exemption Advantage

A high-impact strategy involves the “Group Exemption” (Section 264 (3) HGB and Article 403 DCC). If a parent provides a guarantee declaration for its subsidiary’s commitments, the subsidiary may be exempt from auditing and publishing separate financial statements. We recommend evaluating this guarantee model to reduce administrative burdens significantly.

5. Measurement Bases: Prudence vs. Fair Value

The valuation method you choose is the core of your financial model. German GAAP uses a strict “Historical Cost” basis. Its strong “prudence concept” means hidden reserves may accumulate more than they would under IFRS.

• Current cost.
• Value in use.
• Market value (fair value).
• Net realisable value.

Strategic Nuance in Reporting Options

For the 2026-2027 period, Dutch GAAP users can opt for specific IFRS models, such as IFRS 9 for financial assets or IFRS 16 for leases. However, the Dutch Accounting Standards Board (DASB) cautions against full IFRS 15 adoption for smaller firms due to high complexity. We suggest weighing these costs carefully before opting into full IFRS revenue models.

6. Structuring Financial Statements for International Investors

Your financial statements must include a balance sheet, profit and loss account, and detailed notes. German GAAP requires a “Horizontal Layout” for the balance sheet. This is more rigid than the flexible formats (Models A and B) allowed by IFRS and Dutch GAAP.

Investors should note that “Other Comprehensive Income” (OCI) does not exist under German GAAP. This affects how you model equity movements. Additionally, while IFRS and Dutch GAAP prohibit the caption “Extraordinary items,” German GAAP still allows these to be disclosed within the notes to the financial statements.

Finally, the “Management Report” (Lagebericht) is mandatory for medium and large entities in Germany and the Netherlands. Unlike the voluntary IFRS framework, you must include these reports in your publication planning to stay compliant.

7. Cash Flow Modeling and Equity Reconciliations

Cash flow presentation differs between frameworks, particularly in the “Indirect Method.” Dutch GAAP prefers starting with “Operating Profit/Loss,” though it allows “Earnings before or after tax” as alternatives. IFRS and German GAAP typically start with “Profit or Loss.”

• IFRS and Dutch GAAP: You can choose to classify these as operating, investing, or financing activities.
• German GAAP: There is no choice. Interest and dividends received are investing activities; those paid are financing activities.

For equity, you should use a matrix approach for reconciliations. Note that under German GAAP, “profit-and-loss transfer agreements” are presented directly within the P&L. This can make a German P&L look very different from an IFRS-based model where such transactions stay in equity.

8. Preparing for the Future: 2027 and Beyond

Aligning your financial models with these standards ensures a “true and fair” presentation for your stakeholders. This transparency is vital for maintaining trust with investors across the NL-DE corridor.

Looking toward 2027, you should monitor the IASB’s research on intangible assets and climate-related uncertainties. Future-proofed models must account for these emerging risks. Success requires a dual understanding of how local GAAP interacts with international expectations.

9. How NextAccounting can help you

NextAccounting acts as your strategic partner with deep expertise in both Dutch and German regulatory environments. We help scale-ups navigate complex accounting choices to ensure your growth remains uninterrupted.

Our team provides tailored advice on size-related exemptions and framework selection. We ensure your financial models are not just compliant, but also optimized for the European investment landscape. Reach out to NextAccounting for professional guidance to ensure your entity is ready for the 2026-2027 landscape.

Sources

• ABN AMRO Group – Annual Report 2015
• Annual Report 2022 – Tilburg University
• Applying for a business loan or financing | Business.gov.nl
• Business and investment in the Netherlands – Netherlandsandyou.nl
• Business loan guarantee scheme (GO)
• Creating the conditions to scale up the European commercial paper market – ICMA
• Determinants of deposit rates – http
• Dutch Banks in UK – Wise
• Dutch Trade and Investment Fund (DTIF) | Business.gov.nl
• ERDF Equity financial instruments – fi-compass