Pending business

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With the vague legal term executory ( English pending business ) is to prevailing opinion, a contract called that a mutual directed exchange of services, but both parties with the fulfillment not yet begun their contractual obligations or one or both parties their essential contractual obligations not fully have met.

The term is used in the context of accounting law because on the balance sheet date it has to be assessed whether the pending state of a transaction - beyond the balance sheet date - is subject to accounting .

General

The classification as a pending transaction is of particular interest in commercial law ( accounting ), civil law , tax law and the handling of contractual disruptions (e.g. in Section 249 (1) sentence 1 of the German Commercial Code , Section 49 (1) sentence 2 of the German Civil Code , Section 5 ( 1) . 4a sentence 1 EStG ). A prerequisite for a pending transaction is that a contract has been concluded that has reciprocal services as its content, so that pending transactions can result primarily from mutual contracts within the meaning of Section 320 ff. BGB. A binding contract offer , the acceptance of which is certain, can also trigger a pending deal. The pending transaction begins with the conclusion of a contract and ends as soon as both contractual partners have fulfilled their main contractual obligations. If only insignificant secondary obligations remain unfulfilled, there is no longer any pending transaction. The IDW regards the completion of the pending transaction as the fulfillment time of the payment in kind, since this inevitably leads to an accounting for both contracting parties.

Different views on the duration of the limbo

The above definition of terms is the opinion of the Federal Fiscal Court . It is generally recognized that the pending transactions are contracts according to § 320 BGB, in which a mutual performance obligation, a so-called synallagma , is agreed. The adjective floating indicates that a particular deal has been initiated but not yet fully ended. A certain, unspecified period of time must elapse between the beginning and the end of a transaction in order for it to be classified as a pending transaction. Transactions that do not end after a long period of time or are fulfilled immediately, such as cash transactions , do not count as pending transactions.

There are different opinions regarding the duration of the pending state, i.e. about the beginning and end of the pending transaction. From a civil law perspective, the duration of the pending condition can be seen from the entry into force of the contract to the fulfillment of all obligations of the contract. Deviating from this, from an economic point of view, the beginning can also be seen before the contract comes into force and thus before the contract is signed, namely if there is a binding offer ( § 145 BGB), the acceptance of which can be expected with some certainty. The latter view is held by large parts of the literature and jurisprudence . From an economic point of view, the end of the pending deal coincides with the civil law point of view. The fulfillment of all obligations from the contract by both contracting parties is not considered necessary, but the fulfillment of the main service with possibly still outstanding, insignificant ancillary services of the person obliged to provide material or service is regarded as sufficient for the termination of the pending transaction. This (economic) point of view corresponds to the recognized realization time for income, so that the realization principle determines the end of the pending transaction. Other views assume that the performance of both contracting parties must still be outstanding so that the pending transaction has not yet ended, but this view does not take into account the generally neutral treatment of advance payments (see also: Accounting treatment).

Systematics

The subject of pending transactions can in particular be deliveries of fixed or current assets ( purchase contracts , contracts for work and services , contracts for work and services) or services in the form of transfer of use ( rental contracts , lease agreements , leasing contracts , credit agreements ), commercial transactions in the credit sector or other activities or omissions ( service contracts , employment contracts ) be. In principle, when the contract is concluded, the contracting parties can assume that the contractual obligations are equivalent and that the provision of one service requires the provision of the respective consideration and that both are fundamentally of equal value (Synallagma). This does not have to be about the procurement or sale of assets that can be accounted for; a pending transaction can also be a guarantee . The content of the pending deal can be extremely diverse. It can be the delivery of objects, services , other activities or the failure to perform .

Pending transactions can be roughly divided into two criteria. On the one hand, on the basis of the repetition frequency, a distinction can be made between pending individual obligations and continuing obligations and, on the other hand, through the perspective of the person making the balance sheet, a distinction can be made between pending sales transactions and pending procurement transactions.

Pending sales transactions

For those obliged to provide goods or services, the pending transaction is a sales transaction. It can be a sale, ie a change in allocation, of an asset (e.g. a machine) or the provision of a service (e.g. the repair of a machine). The question arises for those who are selling off when they can view the income from the business (see realization principle ). Furthermore, if necessary, he has to show provisions for potential losses from the pending transaction.

Pending procurement transactions

The same transaction that is a sales transaction for one contractual partner is a procurement transaction for the other contractual partner. While the procurer does not have any questions about the realization of income, provisions for contingent losses come into consideration while the business is pending as well as on the part of the person selling.

Pending continuing obligations

A pending long-term obligation, like an individual obligation, is a sales transaction on the one side and a procurement transaction on the other. In contrast to individual obligations, pending long-term obligations have some special features in their civil law structure: The provision of services takes place over a longer period of time and is not limited to a one-off exchange of services. The long-term obligation can be fulfilled in the performance period through periodic partial deliveries, the scope of which does not need to be determined when the contract is concluded. This can make it more difficult to determine the scope and value of the performance compared to individual obligations. The provision of services by both contractual partners takes place on a pro-rata basis, meaning that the pending state of pending continuing obligations only relates to the part of the business that is still open and in the future. Partial deliveries that have already been processed are therefore not (no longer) in a pending state.

Examples of pending long-term obligations are rental, leasing , license , training and employment relationships as well as successive supply contracts (e.g. the supply of gas and electricity). Loans and borrowings are also included in the pending long-term obligations: The subject of the exchange of services is not the surrender and subsequent repayment of a sum of money, but the provision of the credit value for use and the payment of the price for the provision of use in the form of the loan interest . This business is still pending as long as the agreed usage periods are in the future. Losses can only be threatened if (positive or negative) successes for the period up to the balance sheet date have already been reflected in the income statement .

Accounting treatment

According to the prevailing opinion, there is a ban on accounting for pending transactions due to the so-called non- accounting principle for pending transactions. This principle is not legally codified, but is derived from the principles of proper bookkeeping ( accounting ).

It is advisable to record events in connection with pending transactions in the balance sheet, for example for preliminary and subsequent services. These are down payments (see section 266 (2) and ( 3) HGB), provisions for anticipated losses (see section 249 (1) sentence 1 HGB) and the recognition of production costs (see section 255 (2) sentence 1 HGB). Within the framework of valuation units in accordance with Section 254 of the German Commercial Code (HGB), claims and obligations from pending transactions can be included in the balance sheet if they are used to compensate for opposing value movements in another transaction.

In the pending transaction, on the one hand, “fulfillment arrears” are to be shown in the balance sheet as obligations that represent the counter- performance earned by the contractual partner (through his advance performance ) and thus in arrears on the balance sheet date . On the other hand, impending losses in the pending transaction must be anticipated and reported as such in accordance with Section 249 (1) sentence 1 of the German Commercial Code. A loss according to this provision threatens if and to the extent that the value of the service to be provided by the merchant in the pending transaction outweighs the value of the consideration to be claimed from him (excess obligation). The mere possibility of a loss occurring with every pending transaction is not sufficient for this. Rather, threatening means that there are signs that the occurrence of a loss in a specific case appears seriously imminent. On the one hand, a one-sided, overly cautious assessment does not correspond to the meaning of a meaningful accounting and thus also does not correspond to the goal of a representation of the assets, financial and earnings position in accordance with the actual circumstances ( English true and fair view ). On the other hand, it contradicts the principle of Section 253, Paragraph 1, Clause 2 of the German Commercial Code, according to which provisions - including those for impending losses - may only be recognized in the amount required. There must therefore - according to the general principles of the formation of provisions - more reasons for the occurrence of a loss than against it.

Trade balance and tax balance

However, this only applies to the trade balance. The principle of relevance was restricted by the introduction of Section 5 (4a) EStG (law to continue the corporate tax reform) on October 29, 1997. According to this, provisions for impending losses may not be formed in the tax balance sheet , unless they arise from the commercial law safeguarding financial risks (reference to Section 5 (1a) sentence 2 EStG). As a result, the commercial passivation requirement is offset by a tax law passivation prohibition. This controversial change in tax law has revived the discussion about the accounting treatment of pending transactions.

International Financial Reporting Standards

In IAS 37.1, the International Financial Reporting Standards expressly record the onerous pending contracts ( English executory contracts ) in the accounting company when provisions or contingent liabilities are formed . This means impending losses , for which a provision must be made in accordance with Section 248 (1) sentence 1 of the German Commercial Code (HGB), and negative market values for derivatives . As mutual contracts, these have a market value of zero at the time the deal is concluded and are a balanced pending deal. If negative market values arise during the term , these are to be hedged as impending losses through provisions.

Pending transactions with credit institutions

At credit institutions , the entire trading area ( securities , foreign exchange , derivatives , futures , types or precious metals ) consists of financial contracts that can result in pending transactions. If one part fulfills its obligations in such commercial transactions, it cannot be sure whether the other part will also meet its obligations at the same time. This applies to both commercial transactions with bank customers and commercial transactions among banks ( interbank trading ). The insolvency of the Herstatt Bank in June 1974 had already induced credit institutions to map such risks of insolvency-related non-fulfillment of contractual service obligations in the trading areas. In general, the credit industry speaks of the counterparty risk or " Herstatt risk ". This is the risk of failure of a professional market participant (counterparty; in this context the term serves as the opposite of the customer). In addition to the classic credit risk - for example from money market transactions - this also includes in particular the default risks that arise from derivative positions or when processing financial transactions.

Under settlement risks the mutually not fulfilled after a completion time point transactions are understood, from which changes in value of traded financial instruments can result. The so-called advance performance risk is the performance risk in which the counter-transaction of the other contractual partner who is obliged to perform has not yet been fulfilled, but the institution itself has already performed in accordance with the contract. The difference between settlement and advance performance risks is therefore whether both contractual partners have not (yet) performed although they were obliged to perform (settlement risk) or whether only one partner has not fulfilled its obligation to perform (advance performance risk). In addition, the wholesale risk is limited by law to the trading book , while the settlement risk also extends to the banking book of an institution. In order not to have to show these counterparty risks in the balance sheet, credit institutions try, whenever possible, to process the affected transactions in such a way that both contractual partners have performed their services by the balance sheet date. If this does not succeed and a contractual partner has made an advance payment , according to Art. 379 No. 1 Capital Adequacy Ordinance (English abbreviation CRR), the contractual consideration must be backed as a risk position with own funds if it has not yet been made after 4 days.

An exception to the non-accounting as pending transactions arises for credit institutions from Section 340e (3) HGB in the context of the recognition of derivatives in the trading portfolio , because according to this provision, financial instruments (such as derivatives) are to be valued at fair value less a risk discount. The balance sheet for the derivatives in the trading portfolio is carried out at credit institutions according to the form of the credit institution accounting regulation (RechKredV) in asset item “6a. Trading portfolio "as well as in the liability item" 3a. Trading portfolio ". The protection seller of a credit default swap shows a contingent liability in the amount of the assumed credit risk in accordance with § 251 HGB or § 340a HGB in conjunction with § 35 RechKredV and the corresponding forms, as long as a claim is not expected.

literature

Below is a selection of the literature on pending deals.

Monographs:

  • Heinrich Bauer: Pending business in tax law . Dissertation Erlangen-Nuremberg, 1981.
  • Hartmut Bieg: Pending transactions in the commercial and tax balance sheet. European Theses: Series 5, Economics and Business Administration, Volume 151.
  • Hans Karl Vellguth: Principles of proper accounting for pending transactions . Publication of the Schmalenbach Association Volume II, Leipzig, GA Gloeckner, 1938.

Essays:

  • Mathias Babel: Rights of use, prepaid expenses, pending transactions - a “magic triangle” of accounting . In: Werheim / Heurung (Hrsg.): Tax burden - tax effect - tax structuring, commemorative publication for the 65th birthday of Winfried Mellwig . Wiesbaden, DUV, 2007, pp. 1-35.
  • Karlheinz Küting , Harald Kessler: Principles of unlawful loss provisions - exemplified by the training costs rulings of the BFH of January 25, 1984 . German Tax Law 1993, pp. 1045-1053.
  • Lothar Woerner: Basic questions about accounting for pending transactions . In: Finanz-Rundschau 1984, pp. 489–496.

Individual evidence

  1. ↑ Ludwig Schmidt: Income Tax Act , 1996, p. 380 f., Item 453
  2. ↑ so also BGH NJW 1993, 1194
  3. ↑ IDW RS HFA 4, 2000, p. 3 f., Item 10
  4. ↑ Georg Crezelius: The so-called pending business in commercial, corporate and tax law. In: Festschrift Georg Döllerer , 1988, pp. 81, 83; Norbert Winkeljohann, Michael Geißler, in: Beck'scher Balance Sheet Comment , 6th edition, November 2006, § 252 HGB, marginal no. 44
  5. ^ Michael Hommel, in: Jörg Baetge, Hans-Jürgen Kirsch, Stefan Thiele: Commentary on accounting law , as of October 2009, § 249 HGB, marginal no. 110
  6. ↑ BFH, judgment of November 16, 1982, Az .: VIII R 95/81, BStBl. II 1983, p. 361; similarly also IDW RS HFA 4, Item 10
  7. ^ Lothar Woerner, fundamental questions on accounting for pending transactions , in: Finanz-Rundschau 1984, pp. 493, 489; Michael Hommel agrees, in: Jörg Baetge / Hans-Jürgen Kirsch / Stefan Thiele, commentary on accounting law , as of October 2009, § 249 HGB, marginal no. 110
  8. ↑ Joachim Schulze-Osterloh, in: Adolf Baumbach, Alfred Hueck: Commentary on the GmbHG , 18th edition, October 2012, § 42 GmbHG, marginal no. 102
  9. ↑ IDW RS HFA 4, 2000, p. 2 f., Item 3
  10. ↑ Hans Adler / Walther Düring / Kurt Schmaltz, Accounting and Auditing of Companies , 1994, § 249 HGB Rn. 139
  11. ↑ Banking business in the form of a guarantee business within the meaning of Section 1 (1) No. 8 KWG
  12. ↑ a b George Crezelius: The so-called floating business in commercial, corporate and tax law. In: Festschrift Georg Döllerer , 1988, p. 81 f.
  13. ^ Heinrich Birck, Heinrich Meyer: The bank balance sheet ; 5. Part delivery, Gabler, 1989, p. 349
  14. ^ Adolf Moxter : Principles of proper accounting , 2003, pp. 50–51
  15. ↑ BFHE 195, 567, Federal Tax Gazette. II 2001, p. 758.
  16. ↑ Hans Adler / Walther Düring / Kurt Schmaltz, Accounting and Auditing of Companies , 1994, § 249 HGB Rn. 144, § 252 HGB Rn. 74
  17. ↑ Hans Adler, Walther Düring, Kurt Schmaltz: Accounting and Auditing of Companies , 1994, § 252 HGB Rn. 74
  18. ↑ BFH, judgment of August 1, 1984, BFHE 142, 226, BStBl. II 1985, p. 44
  19. ↑ Robert Schütz: The decisive factor - a fossil? 2002, p. 124
  20. ^ Christian Schwarz: Derivative financial instruments and hedge accounting , 2006, p. 108
  21. ^ Hans E. Büschgen: Das kleine Banklexikon , 2006, p. 558; Wolfgang Grill, Hans Perczynski, Hannelore Grill: Wirtschaftslehre des Kreditwesens , 2009, p. 528