What is a Debt Consolidation Loan
As part of the consolidation in the consolidated financial statements, debt consolidation must be carried out in accordance with Section 303 (1) of the German Commercial Code: "Loans and other receivables, provisions and liabilities between the companies included in the consolidated financial statements and the corresponding prepaid expenses are to be omitted." However, according to Coenenberg, this list is not complete. Rather, all balance sheet items with the nature of a receivable vis-à-vis other included group companies are to be offset against the corresponding positions of liabilities. This debt consolidation can be dispensed with in accordance with Section 303 (2) HGB if the amounts to be omitted are of subordinate importance for conveying a true and fair view of the Group's asset, financial and earnings position.
Debt consolidation results from Section 331 (1) No. 4 AktG: "Receivables and liabilities between the companies included in the consolidated financial statements are to be omitted". This obligation relates not only to the balance sheet items shown as "receivables" and "liabilities", but also to all other items that either correct such receivables or such liabilities (e.g. discount, value adjustment) or the nature of such Receivables and liabilities are to be equated (e.g. provisions, prepaid expenses). There may be a difference between the sum of the group-internal receivables and the sum of the group-internal liabilities. This difference from the debt consolidation appears in the group balance sheet as a correction of the group equity, either by changing the group balance sheet profit accordingly or by entering it under another adjustment item. The change in the difference from debt consolidation compared to the previous year is recognized in the income statement.
Pursuant to Section 303 (2) HGB, loans and other receivables, provisions and liabilities between companies that are included in the consolidated financial statements must be omitted when preparing the consolidated financial statements (debt consolidation). In accordance with the principle of materiality, however, receivables and liabilities between group companies do not need to be offset if the amounts to be omitted are only of subordinate importance (Section 303 (2) HGB). The offsetting of debts does not cause any difficulties and has no effect on income as long as receivables and liabilities are matched in the same amount. However, if the value of receivables and liabilities diverges because the affiliated companies pursue an autonomous and different balance sheet policy in the individual financial statements or statutory provisions enforce this, differences in consolidation affecting income regularly arise, which are to be treated in the same way as the procedure for eliminating interim profits. Is z. If, for example, a discount is activated for an interest-free loan that is depreciated over the term of the loan, the depreciation must be neutralized in the respective year by a consolidation affecting income. In terms of consolidation, this is done by first calculating the total difference between receivables and payables. The portion of the period that affects income results from the change in the difference compared to the previous year. The part not affecting income (the difference already offset in the income statement in previous periods) goes to the DZW. loss carryforward oa the group reserve or is to be offset against these items, or it is to be shown as a consolidation item from the offsetting of debts in the consolidated balance sheet.
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