Auditing and Consulting Services for Automotive Suppliers

We model various sales, pricing, cost, and investment scenarios and highlight their impact on earnings, the balance sheet, and liquidity.

We lay the groundwork for evaluating production facilities, inventory, personnel, and locations in response to changes in demand and for identifying the need for action at an early stage.

We analyze capital requirements, liquidity trends, financing structures, and debt-service capacity, and prepare viable financing plans as well as prepare for meetings with banks.

We assess the impact on accounting, valuations, provisions, and the company’s ability to continue as a going concern—based on current planning and economic developments.

Significant price pressure, lower order volumes, or increased costs for materials, energy, and personnel can result in existing supply or procurement contracts no longer being economically viable to fulfill.

If a pending transaction is expected to result in a loss, a provision for anticipated losses must generally be recognized in the annual financial statements prepared in accordance with commercial law. Relevant factors include, among others, agreed-upon prices, expected call-off quantities, costs still to be incurred, and any price adjustment or termination rights.

In the tax balance sheet, however, provisions for potential losses from pending transactions may generally not be recognized.

A key factor in determining whether to recognize a provision is whether, as of the balance sheet date, there is already a sufficiently specific obligation toward the affected employees and whether it is reasonable to expect that the obligation will be exercised.

A purely internal company decision to reduce the workforce is generally not sufficient. Depending on the specific circumstances, for example, concluded agreements, binding offers, or sufficiently specific obligations under a social plan may require the recognition of a provision.

The treatment depends on the specific terms of the contract and the economic circumstances. In its ruling of February 5, 2026, IV R 11/24, the Federal Fiscal Court (BFH) clarified that, under certain conditions, a provision may be recognized for specific early retirement models even in the absence of a separate leave-of-absence agreement that has already been concluded. The key factors are, in particular, the existing entitlement, the economic basis arising from past work performance, and the likelihood that the entitlement will be exercised.

Not all restructuring costs expected in the future may be provisioned at the time the decision to close a location is made.

In general, a provision requires an obligation to a third party. Purely future internal expenses—such as those for certain relocation, training, or organizational measures—cannot be set aside solely on the basis of a restructuring plan.

The key factors are ownership structure, economic allocation, and agreements with the customer. First, a distinction must be made between the company’s own tools and those belonging to the customer. Tool cost subsidies should not be treated on a flat-rate basis according to a uniform scheme; the contract terms and the accounting and tax treatment should be coordinated.

What matters is not just the location of the inventory, but to whom the economic ownership is attributable.

If economic ownership remains with the supplier until the goods are withdrawn, the goods continue to be part of the supplier’s inventory and must also be included in the inventory count. Valuation is generally performed in accordance with the general rules for inventory. A write-down may be necessary in the event of excess inventory, a decline in price, or limited usability.

Placing inventory in a restricted inventory does not automatically result in a write-down. The decisive factors are the reason for the restriction, the economic allocation, and the continued usability of the inventory.

If there are quality defects, necessary rework, or limited sales opportunities—or if the only option left is to scrap the items—it must be determined whether a write-down is required under the lowest-value principle of commercial law.

Conversely, if parts belonging to the customer are located in the supplier’s restricted inventory, they do not constitute part of the supplier’s own inventory merely because of their storage location.

Items to be reviewed include, among others, machinery and equipment, tools, inventories, capitalized development costs, and outstanding supply and procurement contracts. In addition, compensation claims may exist, or loss-making contracts may trigger a provision for contingent losses.

Failure to meet financial covenants may affect not only financing discussions or waivers but also the assessment of the company’s ability to continue as a going concern and the disclosures in the annual financial statements. Depending on the accounting standard and financing agreement, the presentation and classification of financial liabilities may also be relevant.

Relocations can affect transfer pricing, permanent establishments, value-added tax, customs duties, financing, and the valuation of existing assets. Functions, opportunities, risks, and assets within a corporate group, as well as customs duties and supply chains, should also be taken into account early on in the planning and location decision-making process.