1. Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH Automotive Leasing Business‘s Take on Leasing Accounting Leaseurope One-Day-Business Forum – Brussels – 5th Nov 2007

2. 2 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Automotive Leasing Business‘s Take on Leasing Accounting 1.Significance of Leasing to Captive Companies using the example of Volkswagen Group 1.1Volkswagen Leasing GmbH 1.2International Leasing Activities within the Volkswagen Group 1.3Volkswagen Leasing GmbH‘s Client Base 1.4The Criteria for Differentiating the Operate and Finance Lease pursuant to IFRS and German Tax Law 2.The Impact of the IASB Leasing Project 2.1The Aim of the Leasing Project and the Standard-Setter‘s Criticism on the Current Regulations 2.2The „Right-of-use-Approach“ 2.3The Impact of the Leasing Project on Volkswagen Leasing GmbH‘s clients 3.Conclusion

3. 3 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Branch Verona/Italy Branch Milan/Italy 100% Leasing 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

4. 4 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 International Leasing Activities of Volkswagen Group 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

5. 5 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Volkswagen Leasing GmbH‘s Client Base 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

6. 6 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Operate and Financial Lease according to German Tax Law Main Distinctive Criteria according to German Tax Law 1.Relationship between basic lease period and the asset depreciation range of the leased property  Leasing Period not less than 40% and not exceeding 90% of the asset depreciation range 2.Agreement for a put option on the part of the lessor  No put option for the leased asset on part of the lessor 3.Agreement on the right of termination on the part of the lessee  Contractual requirement on part of the lessee for a final payment amounting to the costs not covered by the leasing relationship 4.Agreement on profit sharing in the event of windfall profits  Lessor must receive a minimum of 25% of the amount exceeding the residual value of a leased property upon sale of the same 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

7. 7 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Volkswagen Leasing GmbH’s Current Contracts according to German Law and according to IFRS IFRS German Law 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

8. 8 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 „ I doubt you‘ve ever flown in an aircraft that‘s on the balance sheet“ Sir David Tweedie The Standard-Setter‘s Criticism on the Current Regulations 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

9. 9 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Aircraft on the Balance-Sheet? Deutsche Lufthansa AG: Assets as of 31.12.2005 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

10. 10 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 …a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Inconsistancy between the IAS 17 and the Framework …a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Asset: Liability: 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

11. 11 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Currently discussed Accounting Models for Leasing Relationships 1.„Right-of-use-Approach “ 2.„Whole-Asset-Approach“ 3.„Executory-Contract-Approach“ 4.„Current-Model“ 1. “Right-of-use-Approach” 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

12. 12 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 The „Right-of-Use-Approach“ impact on the lessee‘s Balance-Sheet The „Right-of-Use-Approach“ results in a Balance-Sheet- Extension on the part of the lessee! 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

13. 13 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Economical Significance of SMEs EnterprisesTurnoverEmployees Trainees Gross Value Added Source: Institut für Mittelstandsforschung, Bonn, 2005 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

14. 14 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Intention of German SMEs to report according to IFRS No Yes PricewaterhouseCoopers: IFRS in Medium-Sized Enterprises, 2005 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

15. 15 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Leasing Project‘s Impact on Lesses‘ Balance-Sheet Changes in the Intensity of Fixed Asset Investments of selected DAX/MDAX Companies* Changes in %Number of Companies Less than 1 %7 1-2%4 2-3%2 3-4%1 4-5%1 More than 5%3 * Leibfried/Rogowski in KoR 12/2005 p. 552 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

16. 16 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Leasing Project‘s Impact on Lesses‘ Balance-Sheet Changes in the Capital Ratio of selected DAX/MDAX Companies* Changes in %Number of Companies Less than 1 %9 1-2%5 2-3%- 3-4%2 4-5%1 More than 5%1 * Leibfried/Rogowski in KoR 12/2005 p. 552 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

17. 17 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Conclusion – Questionable Value Add of the Leasing Project -„Additional“ Information can already be deciphered from Annual Reports to large extent (notes). -Fragmentation of leased assets into a multiple sub rights does not lead to a more accurate picture of the reporting company but rather to confusing balance sheets. -Besides a conceptional faultlessness a Standard has to be practicable. The practicability would no longer be ensured. -Discreation regarding Recognition of Leasing Properties in the lessees‘ balance-sheets does not lead to the alarming deficiencies as described by Sir Tweedie and the SEC. -Inconsistancy between the IAS 17 and the Framework could be rectified by means of an adjustment of the Framework. -A further increase of Complexity in Leasing Accounting -albeit only for a Minority of lessees- is in any case unacceptable for Volkswagen Leasing GmbH! 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 3.

18. 18 Dr. André H. Grabowski – Chief Accountant – Volkswagen Leasing GmbH 5. November 2007 Thank you very much for your Attention!