International annual financial reports: The power of global collaboration

Moore MKW and Ebner Stolz, one of Germany’s top 6 accountancy firms, have been working together on international assignments for years. A question arose in 2022 from a Japanese ship builder looking for a party who could audit the annual financial statements of a German operating company and a Dutch holding. The Japanese company had taken over a German company that year and needed support, in particular with the international group accounts, regarding local legislation and regulations in both countries. This is also complex according to Rick. Because certain accounting principles also differ between the Netherlands and Germany.

“The manner in which we process profits on projects in the Netherlands in the financial statements is sometimes different than in Germany”, he explains. “If a company gets a large assignment and is halfway through the construction of that assignment on 31 December, one cannot process interim profits in Germany in the annual financial statements. In the Netherlands, the rules are different: half of the project’s profit can be processed here in the financial statement. This is an important difference because it results in very different profits in the financial statements.” Such differences can arise at the various levels of an international group’s financial statements. “One notices that this is occurring more and more because doing business internationally is increasing and happening more often.”

This case posed several challenges for the auditors in Germany and the Netherlands. “The first year audit is always quite intensive. Here it concerned a large company, and one must get to the bottom of how the company is structured and what is happening in order to determine which regulations must be applied to process the profit, but in this situation also how to process the takeover.” It helps, according to Rick, that Moore MKW and their colleagues at the German accountancy firm have been collaborating already for a long time. The auditor know each other and their expertise, and therefore take the right steps for the client to act quickly and efficiently. “One works intensively with the German colleagues on such assignments and thus one learns how to work together well on audit assignments.”

The collaboration between Ebner Stolz and Moore MKW (previously KroeseWevers) was agreeable for the Japanese company because only one contact person was needed to arrange all the affairs in Europe. “We know where to find the appropriate people among our international contacts and networks to collaborate and with whom we can form a group of specialists to work on the assignment.” In this case it was an audit assignment which mainly involved auditing specialists. But, according to Rick Ikink, issues also arise about fiscal structures or international VAT, upon which appropriate tax advisors in various countries become involved. “We have really invested in our international relationships. This is a big advantage for a client because they do not need to look for different specialists in various countries; we take care of this.”

In addition to the professional aspect, international collaboration between the auditors also requires dealing with, for example, cultural differences. Because, according to Rick, they are certainly there. “One always notices that we Dutch are rather direct in our communication and have a flat hierarchy. From our perspective, Germany has a more formal culture. And the Japanese communicate differently to what we are accustomed to, they are always decent and polite.” Understanding the cultural differences is particularly important for complex situations, points of view differences or time pressure. The different languages sometimes make it even harder. In such cases it helps, according to the auditing director, if one has collaborated often and for a longer period.

After the first year audit, the Japanese client indicated that they wanted to continue with the collaboration between Ebner Stolz and Moore MKW. “The client indicated that they were very pleased with the support they had received and consequently are ‘compliant’ now and meet all legislations and regulations.” All parties benefit from a long-lasting relationship.