Volkswagen Adopt IAS
October 22nd, 2013
[International Accounting and financial statement]
Case 2 “Volkswagen Group”
Questions and Answers
1. Based on the information provided in the chapter, describe the basic features of German accounting at the time Volkswagen adopted IAS. What development factors cause these features?
APPUNTI DA FARE
IAS compliant
In 2001 first consolidated financial statement
All mandatory requirements fulfilled
IAS 12 and IAS 39 already fulfilled in 2000 financials
Clear and fair view of net financial positions, asset classification in the book, earning indicators, etc.
All in euro million
Method used: accordance with cost of sales
Disclosure of contingent assets and liabilities side
Pre-consolidation assumptions ok
To be aligned with what required by German commercial law, all specific footnote, appendixes were added
NOTE: The accounting evaluation and consolidation methodology previously applied to the Volkswagen Group in accordance to German Commercial Code have been amended
2. What differences between the accounting requirements in the HGB and IAS are highlighted in Volkswagen’s disclosure? Are the German requirements consistent with your characterizations in requirement 1?
The different accounting treatment between IAS and German Commercial Code may be explained in the following way through the various items:
Volkswagen classifies development costs as intangible assets (IAS 38), meaning non-monetary ones or at least non identifiable. These costs are measured at cost and amortized on a recurrent basis (with amortization in the annual economic statement and the new value of the intangible asset in the balance sheet) according to the life of the asset (in this case being intangible, there would be also the possibility not to have amortization every year because there is not a specific life time period of the asset). This is one of the most significant and challenging accounting issues in the automotive industry which creates
[International Accounting and financial statement]
Case 2 “Volkswagen Group”
Questions and Answers
1. Based on the information provided in the chapter, describe the basic features of German accounting at the time Volkswagen adopted IAS. What development factors cause these features?
APPUNTI DA FARE
IAS compliant
In 2001 first consolidated financial statement
All mandatory requirements fulfilled
IAS 12 and IAS 39 already fulfilled in 2000 financials
Clear and fair view of net financial positions, asset classification in the book, earning indicators, etc.
All in euro million
Method used: accordance with cost of sales
Disclosure of contingent assets and liabilities side
Pre-consolidation assumptions ok
To be aligned with what required by German commercial law, all specific footnote, appendixes were added
NOTE: The accounting evaluation and consolidation methodology previously applied to the Volkswagen Group in accordance to German Commercial Code have been amended
2. What differences between the accounting requirements in the HGB and IAS are highlighted in Volkswagen’s disclosure? Are the German requirements consistent with your characterizations in requirement 1?
The different accounting treatment between IAS and German Commercial Code may be explained in the following way through the various items:
Volkswagen classifies development costs as intangible assets (IAS 38), meaning non-monetary ones or at least non identifiable. These costs are measured at cost and amortized on a recurrent basis (with amortization in the annual economic statement and the new value of the intangible asset in the balance sheet) according to the life of the asset (in this case being intangible, there would be also the possibility not to have amortization every year because there is not a specific life time period of the asset). This is one of the most significant and challenging accounting issues in the automotive industry which creates