DGAP-News

GRENKE AG: GRENKE informs about exonerating statements and points of criticism of BaFin's special auditor - Seite 3

No doubts as to the existence of the leasing business

According to Mazars, there are no doubts as to the existence of the leasing business, which constitutes GRENKE's core business with leasing receivables of EUR 5.6 billion. This finding also confirms the interim results of the ongoing KPMG audit from December 2020.

In connection with the lease receivables, Mazars also reviewed GRENKE's due diligence on resellers. GRENKE currently works with around 36,000 resellers who broker the leasing relationship with the end customer. Mazars identified weaknesses in the internal audit system. According to GRENKE, these findings need to be reviewed. Mazars has found no evidence to support the allegation of systematic fraud by resellers.

Goodwill essentially recoverable

Mazars confirms that no systematic errors were made in testing the recoverability of goodwill on franchises already acquired. Despite methodological deficits, the valuations of goodwill are considered justifiable in individual cases. When valuing the former franchisees at the time of the acquisition, there were both upward and downward deviations from the originally agreed purchase price mechanism. The purchase prices were not systematically overstated.

Warth & Klein Grant Thornton (WKGT) had already referred to the purchase price deviations in its expert opinion in December 2020, but had come to the conclusion that the acquisitions of the 17 franchise companies can be described as positive overall for GRENKE AG .

In this context, Mazars criticizes the returns of CTP and the other financial investors ex post as excessive. Mazars concludes this from an analysis of the top 10 acquisitions by amount of goodwill. Mazars points out that for the franchise investments between 2003 and 2018, paybacks of EUR 62.6 million compared to investments of EUR 7.2 million occurred. Franchise companies not acquired in the past accounted for losses of EUR 6.5 million, which are not included in the EUR 62.6 million.

Reassessment in accounting of the franchise business

A significant point of criticism by Mazars concerns the accounting of the franchise companies. Mazars is of the opinion that these should have been consolidated in the consolidated financial statements as soon as they were established. Based on this assessment, the Board of Directors, after consultation with the auditor KPMG, has reassessed the accounting treatment of the franchise business. Upon consideration of all available information, the Company believes there is greater evidence suggesting that the franchise companies should have been consolidated in the consolidated financial statements as soon as they were established, irrespective of the ownership structures, due to de facto control in accordance with IFRS 10. Due to this reassessment, the comparative figures for 2019 are also corrected and presented in the consolidated financial statements for 2020. The consolidated financial statements of the previous years remain unaffected.