Accounting disclosures show comparability constraints by Europe’s carmakers

In the fifth of six planned Special Comments outlining accounting observations on the 2007 results of companies in key sectors, Moody's Investors Service examined the accounting disclosures of Europe's rated automotive manufacturers and commented on constrained comparability between the financial statements.
The eight companies featured in the report are BMW AG (rated A1/P-1/negative), Daimler AG (A3/P-2/positive), Fiat S.p.A. (Baa3/stable), MAN AG (A3/P-2/stable), Peugeot S.A. (Baa1/P-2/negative), Renault S.A. (Baa1/P-2/negative), Volkswagen AG (A3/P-2/positive), and AB Volvo (A3/P-2/stable).
"Financial analysis of automotive manufacturers is based on manufacturing-company stand-alone financial statements, excluding the separately rated captive financial services operations (which play an important strategic role in supporting manufacturers' wholesale distribution and retail sales operations)", said Philip Robinson, a Moody's Vice President-Senior Accounting Analyst, and author of the report.
However, the rating agency observed that there are no requirements in IFRS for the presentation of these stand-alone financial statements; therefore the separate reporting of these operations is provided by the issuers as additional unaudited non-GAAP information, and as such, there is no guidance for its preparation — in practice, the issuers provide limited disclosure as to the methods they use — resulting in scope for reduced comparability between the issuers.
"In addition, the information provided for the automotive operations that is presented tends to be limited — generally only the primary statements are given (income statement, balance sheet and cash flow statement), with the notes to the financial statements providing detail for the consolidated numbers only," Robinson added.