This paper seeks to identify macroeconomic risks due to Brexit and how these risks influence the subsequent measurement of assets under IAS 36 Impairment of Assets.
The central research question is whether Brexit leads to an increased impairment risk for German corporations with cross-border relations. To investigate the question, chapter 2 discusses the UK’s relevance to the German economy and explains the relevant procedures under IAS 36. Chapter 3 analyses the macroeconomic changes since the referendum and derives macroeconomic risks for future economic development. Finally, the paper examines the impact of identified macroeconomic risks on key assumptions of impairment testing under IAS 36. An illustrative example of a German car manufacturer with production and dis-tribution in the UK shall demonstrate a potential impairment risk due to Brexit. The analysis closes with a critical evaluation of impairment testing in the context of Brexit. The scope of the paper encompasses German corporations which prepare financial statements in accordance with IFRS.
"What is happening is a disaster for the economy, looking at it from a purely economic point of view", states C. Pissarides, a Nobel Prize-winning economist, commenting on the United Kingdom’s (UK) exit from the European Union (EU). The referendum in June 2016 has triggered a series of unfavourable changes in the UK’s economic climate, which in turn has affected other European countries. Numerous businesses in and outside of the UK are suffering from political uncertainties due to the fear of a disorderly Brexit and the accompanying macroeconomic effects, e.g. devaluation of the British pound and declining con-sumer demand in the UK. Foreign companies that are exposed to the UK through trading relationships, especially those with cross-border supply chains and operations, are required to reassess the future of their businesses in the UK due to adverse market prospects.
German companies with close relations to the UK can be directly and indirectly affected by economic changes due to Brexit. It is therefore necessary to examine whether and to what extent the economic changes need to be reflected in entities’ financial statements. Particular attention should be paid to the faithful presenta-tion of companies’ assets and liabilities.
Inhaltsverzeichnis (Table of Contents)
- 1 Problem description
- 2 Background
- 2.1 UK's relevance to the German economy
- 2.2 Impairment of assets under IAS 36
- 3 Identification of impairment risk for German companies due to Brexit
- 3.1 Macroeconomic Brexit effects
- 3.2 Impact on impairment testing under IAS 36 for German companies
- 3.3 Illustrative example: Impairment risk for goodwill under IAS 36
- 3.4 Critical evaluation
- 4 Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
The seminar paper aims to investigate the potential balance sheet risks arising from Brexit for German companies. It analyzes the implications of Brexit on impairment testing under IAS 36, focusing on the impact on goodwill valuation and the broader macroeconomic effects.
- Impact of Brexit on German companies' balance sheets
- Impairment testing under IAS 36 in the context of Brexit
- Macroeconomic effects of Brexit on German companies
- Illustrative example of impairment risk for goodwill
- Critical evaluation of the potential risks and their impact
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter 1: Problem description introduces the topic of Brexit and its potential impact on German companies' balance sheets, setting the stage for the subsequent analysis.
Chapter 2: Background provides contextual information on the UK's relevance to the German economy and discusses the principles of impairment testing under IAS 36, laying the foundation for understanding the risks posed by Brexit.
Chapter 3: Identification of impairment risk for German companies due to Brexit delves into the specific macroeconomic effects of Brexit, analyzes their implications for impairment testing under IAS 36, and presents an illustrative example of the potential risks for goodwill. This chapter provides a comprehensive assessment of the potential balance sheet risks arising from Brexit.
Chapter 4: Conclusion summarizes the key findings and conclusions drawn from the analysis.
Schlüsselwörter (Keywords)
Brexit, balance sheet risk, impairment testing, IAS 36, goodwill valuation, macroeconomic effects, German companies, UK economy, potential risks, critical evaluation, impact.
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- Anastasia Harder (Autor), 2019, What balance sheet risks arise from Brexit?, Múnich, GRIN Verlag, https://www.grin.com/document/537951
