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Twelve leading German family-owned companies, part of the Mittelstand that forms the backbone of the country's economy, have clubbed together to lobby over accounting standards they warn could be the "death knell" for certain businesses.
Groups including media giant Bertelsmann, pharmaceuticals makers Merck and Boehringer Ingelheim, supermarket chain Lidl and bank Metzler & Co -- with combined annual revenues of euro120bn ($144bn) -- are upset by several of the new IFRS accounting rules, in particular that on equity capital.
"Some of the rules are not acceptable. We cannot live with them," said Dieter Truxius, a director at Heraeus, a euro 468bn precious metals company and member of the group. "The biggest problem up till now is with equity. The rule makes no sense economically. It could be the death knell for a certain type of company [known as GmbH & Co KG and popular with the Mittelstand]."
The Mittelstand companies fear the rule on equity capital, known as IAS 32, would undermine their capital base by reclassifying the money families had invested as long-term debt.
This would lead to assets shrinking and liabilities soaring. "It would lead to a dramatic weakening of our balance sheets and raise our borrowing costs," Mr Truxius added.
A similar issue has hit the big four accountancy firms over the money invested by their partners, so-called partner capital.
The new grouping is the latest sign of the Mittelstand trying to organise to ensure its voice is heard. There is a separate group to lobby over corporate governance and the companies involved said other joint initiatives were possible in the future.
However, the group could face difficulty in influencing the IASB, the standards setter for IFRS, as there are hundreds of lobbying groups, often with conflicting agendas.
Despite being the work horse of the German economy, the mostly unlisted and often family-owned Mittelstand can be overlooked in discussions on issues such as accounting and corporate governance, which are thought to be mainly topics for listed groups.
But an increasing number of Mittelstand groups have turned to the capital markets to help with financing, leading them to report more figures under international standards. Many Mittelstand companies use IFRS because they are so international and want their customers to understand them better.
Mr Truxius said the group, which was initiated by conglomerate Freudenberg and also includes industry companies Würth, Haniel, Heraeus, Karlsberg, Oetker and publisher Holtzbrinck, has received interest and is likely to grow.
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FT Syndication Service
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