Deutsche Bank recently came under fire for incorrectly disclosing deferred tax assets in its 2019 financial statement, a move that did not align with international accounting standards. The German regulator BaFin pointed out that the declarations regarding deferred tax assets in the bank’s consolidated financial statement were incomplete.
Missing Information in the Financial Statement
BaFin highlighted that Deutsche Bank failed to separately disclose 2.076 billion euros ($2.26 billion) worth of deferred tax assets in the notes for its U.S. business. This omission was significant, especially considering the fact that the bank had recorded several years of losses. The regulator also pointed out that the bank did not adequately explain how it planned to generate sufficient profits in the future.
According to BaFin, the disclosure error made by Deutsche Bank went against the rules set by the International Accounting Standards. The regulator’s findings were the result of a random sampling examination, initially initiated by Germany’s now defunct Financial Reporting Enforcement Panel.
In response to BaFin’s assertions, Deutsche Bank stated that its 2019 financial statement remained compliant with international reporting standards. The bank’s spokesperson emphasized that there was no indication of inaccuracies in the accounts, and no restatement or corrective action was deemed necessary.
Deferred tax assets play a crucial role in a company’s financial statements as they impact future taxable income. By not disclosing these assets accurately, transparency about expected future tax implications is compromised. This can lead to concerns among investors and regulators regarding the financial health and stability of the company.
Following the news of the disclosure errors, Europe-traded shares of Deutsche Bank experienced a 0.9% decline on Tuesday morning. The market reaction underscores the importance of accurate financial reporting and adherence to international accounting standards to maintain investor confidence and trust.
The Deutsche Bank disclosure error serves as a reminder of the significance of transparent and accurate financial reporting. Failure to comply with international accounting standards can have far-reaching consequences, impacting investor perception and market performance. It is crucial for companies to diligently adhere to regulations and ensure that their financial statements reflect a true and fair view of their financial position.