OFFERING MEMORANDUM Global Offering of up to ... - Nordex

Standards Board (‘‘DRS’’), the charging of the company’s value to the group’s own equity in a manner
that does not affect income is, however, not permissible. DRS has, inter alia, responsibility for
developing recommendations regarding the application of the basic principles of consolidated
accounting.
According to currently applicable US GAAP, goodwill must be carried as an asset on the balance sheet
and depreciated over the expected useful life, with 40 years being the maximum.
According to IAS, goodwill also must be shown as an asset on the balance sheet with subsequent
depreciation over the expected useful life. As a rule, the depreciable life is a maximum of 20 years;
longer depreciable lives are possible in justified exceptional cases.
Tangible Assets
German companies frequently orient themselves in assessing depreciation for tangible assets
(buildings, technical equipment, tools, furniture and fixtures) on the useful life customary for their
company as laid down by the tax administration.
According to US GAAP and IAS, tangible assets are depreciated on a straight-line basis over their
expected useful life. This difference in depreciation policy can result in companies that prepare their
balance sheet in accordance with the German Commercial Code basically showing a lower book value
for tangible assets than companies that prepare their balance sheets in accordance with US GAAP or
IAS. Tax-motivated special depreciation as well as tax-motivated reserves in ‘‘reserves for special
depreciation’’ are prohibited under international principles for rendering accounts.
According to IAS, a tangible asset can also be assessed with its ‘‘new valuation amount’’, which
corresponds to its adjusted value (fair value) at the time of the new valuation, less subsequent
cumulative normal depreciation. Increases in value are basically credited to a special valuation reserve
with no effect on the balance sheet. A rise in value will be displayed as earnings to the extent that an
earlier new valuation gave rise to an expense-related depreciation.
Reserves
The German Commercial Code provisions require the creation of reserves for uncertain obligations as
well as for threatened losses from pending and unsettled business transactions. The level of reserves is
measured according to the expenditure expected by a prudent and reasonable businessman. Reserves
for threatened losses from pending business transactions include all internal expenditures, including
indirect marketing and administrative expenses. Reserves for uncertain obligations towards third
parties are recorded as soon as a legal obligation towards a third party has arisen or at least has been
caused in an economic sense.
Reserves may also be formed in German financial statements under HGB for expenditures that are
exactly outlined and assigned to a financial year or to an earlier financial year and that, on the key date
for the financial statement, are probable or certain, but their amount or the time they will occur is
indefinite.
According to US GAAP and IAS, reserves for uncertain obligations are expressed not only when it is
probable that the assets will diminish or an obligation has arisen, but also when the least loss can be
estimated reliably. Future losses that cannot be estimated and costs and risks do not fit the
requirements for the formation of reserves according to US GAAP and IAS. Application of German
Commercial Code provisions can — especially because of the strong influence of tax-related
considerations — lead to higher reserves than are possible under US GAAP and IAS. In the case of a
reduction of reserves in later periods, however, this effect would be reversed.
Long-term reserves for removal of waste rock or rubble or for the disposal of environmental waste,
which under HGB accumulate over the period of the accompanying installations, are, under IAS,
already accounted for at the time of the acquisition of the installation in the amount of the present
value of the estimated completion. These future expenditures count as acquisition costs of the
installation in the same amount as the reserves amount. The period expenditure from this results from
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