Matth. Hohner AG

Notes to the Consolidated Financial Statements for Business Year 2010/2011
System of Allowance for Loans and Receivables (LaR)
The credit risk is taking account by sufficient allowances. Doubtful financial assets whereby a cash receive is
not expected will be impaired by the reporting date. If there are any doubts of the collectability, the credit
risk will be accounted to a respective allowance. In addition, an allowance derived from historical values is
available on portfolio basis.
The decision, if a credit risk is recorded as impairment by the usage of a separate allowance account or directly
as an allowance to the receivable is depending on the reliability of the risk situation. This also applies for
reversals of the allowances.
If there is a high level of reliability, a direct depreciation will be conducted. If there is a lower level of reliability,
the default risk will be accounted on separate allowance accounts. If the reasons for an allowance may
no longer exist, the allowance will be reversed. The reversal of the allowance will not exceed the primary
acquisition costs. The following criteria will be used to identify any indication of impairment:
• Considerable financial difficulties for the issuer or debtor
• Breach of contract
• Concessions to the debtor in cases of financial difficulties
• Bankruptcy or recapitalization of the debtor
• Past experiences with customers
Equity
Matth. Hohner AG has no legal requirements for regulatory equity with the exception of § 7 German Stock
Corporation Act (AktG). The equity management is subject to the whole Group’s capital containing Subscribed
capital, Capital reserves and Revenue reserves. The chairman of Matth. Hohner AG pays attention to an
adequate equity ratio to ensure going concern. Furthermore the equity management tends to maximize the
value of the invested capital and earnings of participations by optimization of the equity- and debt-ratio. The
capital is also monitored by the ratio of equity to total assets.
Provisions
Provisions are formed if the Group has a current (de facto or constructive) obligation as a result of a past
event, the outflow of resources with an economic benefit to fulfill the commitment is probable and it is
possible to estimate the amount of the commitment reliably. A provision will be recognized when the Group
has a present obligation with a probable outflow of resources and the amount of the obligation can be
reliably estimated. Considering sufficient risk prevention, provisions will be accounted with an appropriate
amount. They are corresponding to the best estimations of the probable outflow which would be necessary to
settle the current obligations on the reporting date. Long-term provisions will be discounted with a discount
rate that reflects the current market assessments of the time value of money and the specific risks.
Pensions and other post-employment benefits
The Group has defined a contribution plan as well as a defined benefit plan.
The contributions of the current period are recorded directly in personnel expenses for the defined
contribution plan. The debt of the defined benefit plan is recognized as a liability.
These benefits are unfunded. The expenses for the benefits granted under the defined benefit plans are
determined separately for each plan using the projected unit credit method. This method considers not only
the pensions and future claims known on the balance sheet date, but also future anticipated increases in
salaries for salary-based benefit obligations and also future increases in pensions. Actuarial gains/losses are
disclosed outside the income statement less the effect of deferred taxes, i.e., these are recorded in equity
directly.
Hohner Musikinstrumente GmbH & Co. KG has benefit obligations on the basis of individual commitments
and a company pension plan. The pension plan has been closed for new hires since January 1, 1987.
For SONOR GmbH & Co. KG only one individual commitment exists.
Individual commitments:
Hohner Musikinstrumente GmbH & Co. KG, the SONOR GmbH & Co. KG and Hohner Inc. grant current
pension payments to former board members, managing director and authorized signatories their bereaved for
a life, so far individually agreed.
Notes to the CoNsolidated FiNaNCial statemeNts Notes to the CoNsolidated FiNaNCial statemeNts
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