Basis of consolidation
In general group companies are consolidated on a full consolidation basis. However, the financial information may be included pro rata to the interest held therein. In the consolidated accounts the shareholders' net equity does not need to be separately categorized. Under restricted circumstances other valuation methods and bases for the calculation of the results may be applied than those applied by the company’s corporate accounts.
The reasons, which must be justified, must be shown in the accounts. Any difference between the shareholders' equity shown in the statutory balance sheet and the consolidated balance sheet and between the results after tax must be explained. The consolidated accounts may never be prepared on the basis of information prepared more than three months prior to or after the balance sheet date of the parent. The results of subsidiaries acquired during the year have to be processed in the group results as far as the results have been realized after acquisition.
In principle all companies other than those classified as small are required to be audited. The auditor ascertains whether the financial statements, annual accounts and the annual report, are drawn up in accordance with the law and give the required insight into the capital, the results and in so far the nature of the annual accounts permits the solvency and liquidity of the company. Under certain conditions, group companies are exempt from this obligation.
The auditor must examine whether the financial statements provide the required legal disclosures and whether the financial statements, the directors’ report and other information comply with the statutory requirements. It should also be verified that the directors’ report does not conflict with the financial statements. In principle the auditor is appointed each year by the shareholders and reports to them and the management on the reliability of the annual financial statements.