As was reported by the Handelsblatt magazine, some family-owned companies reject the change over to the new financial reporting standards IFRS (International Financial Reporting Standards). This is because they fear that applying these standards they might lose equity capital, given that according to the IFRS provision IAS 32 equity capital will only be considered as such, if the respective financier is not personally entitled to the repayment of the investment.
Exactly this, however, cannot be ruled out according to the German laws governing the rights of associates, according to the Institute of chartered accountants (IDW). In accordance with the new standards the conventional equity capital of OHGs (partnerships) and KGs (private limited partnerships) would turn out to be outside capital. In extreme cases this may lead to companies hitherto presenting a sound equity capital ratio not disposing of any equity capital at all anymore after the change over.
The Handelsblatt presents the practical example of the Hamburg-based Otto-Gruppe and Boehringer in order to illustrate the disadvantages of the IFRS. However, a modification of the IAS 32 provision has already been brought under way at the London International Accounting Standards Board (IASB) thanks to the initiative of the IDW.