Essay on Volkswagen Adopt IAS

Good Essays
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?
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
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Both classifications recognized the historical cost but the German code does not allow any revaluations.
Pension provisions classified according to the Projected Unit Credit Method (IAS 19).
Avoidance of classification of any provision related to deferred maintenance. Medium-long term provisions carried at net present value. The German principles recognize that some assets are deprived of all other creditor’s access and they are related only to the coverage of the pension obligations or comparable long term liabilities. The common factor is that they need however classified at fair value.
Securities at fair value, also once exceeding cost, with reporting of all effects in the economic statement

Deferred taxes booked at the balance sheet liability method. For losses carried forward the deferred tax assets are recognized; in fact the difference between the carrying amount of the debt security and its tax basis is a deductible temporary difference that gives rise to a deferred tax asset. Potential unrealized losses or gains on the debt securities do not impact the income.

Derivatives are recognized on the balance sheet at fair value, while potential gains or losses linked to these financial instruments are classified as reserve in equity. The fact that the profit or losses deriving from the derivatives are not recognized in “real time” in the financials mean that there is a temporary
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