The consolidated financial statements are based on the separate financial statements of Wacker Chemie AG and its consolidated subsidiaries, joint arrangements and structured entities. All of these companies have their balance sheet date on December 31.
All key reporting data of these companies was audited by independent auditors prior to inclusion in the consolidated financial statements.
First-time consolidation is carried out in accordance with the purchase method, by setting off the acquisition cost against the Group’s share in the equity of the consolidated subsidiaries at the time of their acquisition or first inclusion in the consolidated financial statements. The consolidated subsidiaries’ equity is calculated on the basis of all identifiable assets, liabilities and contingent liabilities, while all items in the statement of financial position are measured at fair value. Any positive difference between the subsidiary’s acquisition cost and the pro rata equity ascertained in this way is capitalized as goodwill and subjected to an annual impairment test. Any negative difference is recognized directly as income. The capital consolidation is carried out by setting off the carrying amounts of the investments against the proportional equity of the subsidiaries.
Investments accounted for using the equity method are initially measured at cost when the acquisition is made. If the cost exceeds the pro rata share of equity, the difference (goodwill) is included in the carrying amount of the investment. The carrying amount has to be tested for possible impairment losses as of the balance sheet date. If the cost is lower than the share of equity at the time of acquisition, this difference is included in the carrying amount and recorded in the statement of income as income from investments in joint ventures and associates. The carrying amounts for these companies are increased or decreased annually to reflect their pro rata earnings, dividend payouts or other changes in equity. If there is any indication that the value of the investment has been permanently reduced, an impairment is recognized through profit or loss. Long-term interests that, in substance, form part of the investor’s net investment in the entity are included in the statement of changes in equity.
Interim results, sales, expenses, income, receivables and liabilities between the consolidated companies, as well as pro rata profits and losses resulting from transactions with associated companies, are eliminated. For those consolidation entries which affect income, the income tax effect is taken into account and deferred taxes are included.
Estimates and Assumptions Used in Preparing the Consolidated Financial Statements
Various judgments can be made whenever it is necessary to evaluate whether control, common control or significant influence exists for entities in which WACKER holds less than 100 percent of the voting rights. Primarily in cases where WACKER holds 50 percent of the voting rights, it must be assessed whether there are additional contractual rights or, in particular, factual circumstances that could result in WACKER having the right to make decisions regarding the potential subsidiary, or whether common control exists. If common control exists, a distinction must be made between a joint operation and a joint venture. This distinction depends on whether WACKER has direct rights to assets or whether rights to the net assets of the entity exist. In this regard, WACKER must take the structure and legal form of the entity, the contractual agreements and other circumstances into consideration.
Changes to the contractual agreements or factual circumstances are monitored and assessed in terms of their possible impact on the evaluation of whether control or common control exists.