Dax rises moderately before Easter

HGB stands for Commercial Code. According to its regulations, companies in Germany must present their annual accounts. The financial statements according to HGB are decisive for the dividends to be distributed and the tax calculation. The international accounting standards according to IFRS, according to which large corporations have to prepare their consolidated balance sheet, are more based on the American accounting regulations according to US-GAAP. The international rules generally make consolidated financial statements more comparable, but follow different principles, for example when evaluating company acquisitions or other assets. Unfortunately, the IFRS rules are changed much more frequently by the International Accounting Standards Board (IASB) than is the case with the HGB regulations in the German legal system.

The assets brought (invested) into a company and shown on the assets side of the balance sheet, above all land, buildings, machines and mechanical systems, participations, inventories, receivables, etc. In principle, companies are obliged to purchase assets at cost of acquisition or production activate. Assets subject to impairment must be depreciated over their useful life. The asset side provides information about the use of funds, i.e. in which values ​​the capital raised is invested. From the composition of the assets side, conclusions can be drawn – to a limited extent – ​​about the company’s performance, and when comparing the liabilities side, possibly also about the willingness to pay.

The balance sheet items on the right side of the balance sheet, mainly equity and liabilities. The liability side of the balance sheet shows the sources from which a company is financed.

The return on sales describes the relationship between profit and sales of a company. It describes what part of the turnover the company can post as profit. However, a company’s profit is subject to fluctuations (eg industry dependency, product dependency), which can make it difficult to determine profitability precisely. The return on sales is particularly suitable for internal company comparisons. It provides information about the returns generated by the various business areas of a group.

The stock of capital of a company can have been supplied from two sources: assets of the owners through: payment by the entrepreneurs, withholding of profits, i.e. self-financing; assets of third parties. Equity in the broadest sense is all of the funds liable to the creditors of a company, including, for example, the private assets of a fully liable partner. In a narrower sense, equity is understood to be the balance sheet equity, which can be determined as a residual variable from the other items on the balance sheet, which explains the dependence of the capital statement on the valuations of the balance sheet items. Mathematically, its amount results from the equation: equity = assets (assets side of the balance sheet) – debts – retained earnings – withdrawals – losses incurred

The equity ratio describes the relationship between equity and total capital. To do this, the capital shown on the liabilities side of a balance sheet is set in relation to the balance sheet total. The more equity a company has at its disposal, the better the company’s credit rating, the higher the financial stability and the more independent the company is from lenders. However, since equity is more expensive than debt, a high equity ratio has a negative impact on the return on capital employed.

Dividends are the percentage of earnings that the company pays out per share. The Annual General Meeting decides on the amount based on the proposal by the Board of Management and the Supervisory Board. The dividend is always dependent on the balance sheet profit and can therefore fluctuate or even be absent altogether, for example if the earnings situation is poor. It can even be funded from reserves if corporate profits are insufficient.

The equity method is used when accounting for investments in companies in which the Group holds less than 50 percent of the shares. The extent of the participation in the equity of the holding company is taken as the basis for showing the balance sheet share of assets in the consolidated balance sheet. The essential variable is the proportionate claim to the profit to which the group is entitled from the participation. On the other hand, wholly-owned subsidiaries are invisible in a consolidated balance sheet because they are included in the regular balance sheet items.

While the acquisition costs of financial and tangible assets are included in the balance sheet in many cases under HGB, accounting under IFRS primarily requires a valuation based on market prices. If there is no market for these assets, the present or current value of an asset item is determined using the discounted monetary benefits that the Group will accrue far into the future, using financial mathematical methods and based on estimates in the financial plan. This fair value assessment is intended to provide a more realistic picture of assets than the pure acquisition prices.

A prankster who thinks badly about it: Deferred taxes are tax advantages and disadvantages that have not yet arisen. They can usually be found in significant amounts among the assets on a balance sheet. These are mainly so-called loss carryforwards, which correspond to tax savings. If a company makes a loss but expects to make profits again in the future, the losses that have already occurred can reduce the tax burden in the years to come. According to IFRS, corporations can then recognize the expected tax savings as an asset in the balance sheet. These improve the group result, although they depend on a company making its way back to the profit zone on the planned scale. Accordingly, deferred tax liabilities are tax liabilities that will only arise in the future. Conversely, if a group makes a loss but does not recognize any deferred tax assets, this means that the auditor does not believe in a return to profitability.

In the course of corporate restructuring, corporations often separate from entire business areas. In order to offer the reader of a balance sheet the greatest possible transparency, business areas that are up for sale are listed separately in the balance sheet. This means that the balance sheet is adjusted for parts of the company that are to be eliminated in the future. However, if the sale does not succeed, this can also be revised. The balance sheet values ​​of the discontinued operations then flow back into the balance sheet.

Capital reserves and retained earnings differ in the way they were created. The retained earnings are fed from the annual surpluses of the previous years and are practically the piggy bank of a company. The capital reserve, on the other hand, is made up of payments made by the shareholders. Capital reserves are a tax-saving model for the owners, especially for medium-sized companies. Like a donation to the company, funds can be parked on the balance sheet, but can also be released again if the owners and management decide. Share buybacks, which are currently popular with many listed companies to maintain prices, are mostly fed from profit and capital reserves. If they are withdrawn from trading, they reduce the subscribed capital by their nominal value, which is included in the group’s equity under liabilities.

Behind the bulky terms is nothing more than the liquid money in the company’s coffers. These include in particular the liquid funds available at any time in company accounts, but also other means of payment that are widely accepted, such as gold coins or securities.