To Author's Page
Following the outbreak of the pandemic and the first lockdown in March 2020, it swiftly became apparent that the coronavirus would have an impact on the prosperity of the various national economies concerned. Even though certain industries emerged as pandemic “winners”, Germany’s GDP soon started to decline; a direct result of the sales slump affecting companies large and small. Given the – in some cases drastic – consequences of the pandemic for the business world as a whole, it comes as no surprise that the virus is also influencing the language of business. In other words, the coronavirus is also infecting external financial reporting – in the form of the new EBITDAC performance measure (Earnings Before Interest, Taxes, Depreciation, Amortisation and COVID-19).
Thus Darmstadt-based company Schenck Process Group, for example, made headlines by creating this new performance indicator adjusted for the effects of COVID-19. Perfume and cosmetics retailer Douglas made similar adjustments when presenting its 2019/20 half-year figures by adding back idle capacity costs for staff and rent associated with branches that were closed during the spring 2020 lockdown to earnings before interest, taxes, depreciation and amortisation (EBITDA). On the one hand, “adjustments” of this kind attract critical scrutiny from both academics and practitioners due to their lack of cross-company comparability and potential influence on investors. On the other hand, considering the pandemic’s far-reaching impact on business performance, it may make a lot of sense to look for performance indicators that provide some insight into the crisis management capabilities of the companies concerned.
In a study, Professor Dr Jochen Pilhofer and Sascha B. Herr, M.A., (both members of the Business Studies faculty at the University of Applied Sciences in Saarbrücken) are exploring the potential impact of the global COVID-19 pandemic on external financial reporting by listed companies. The above-mentioned EBITDAC indicator is what is known as an “alternative performance measure” or APM. APMs are unaudited business performance indicators published by companies on a voluntary basis, which are used to “adjust” certain earnings components (usually expenses) without, however, following a standardized accounting protocol. Consequently, one of the study’s objectives is to examine the impact of the COVID-19 pandemic on APMs like EBITDAC by focusing on financial reports published by companies included in Germany’s DAX stock market index such as SAP, Siemens, BMW, Daimler and Volkswagen – some of the country’s largest and most heavily traded listed companies. The reports they publish effectively act as exemplars of external financial reporting practice. Based on this “best practice”, recommendations on how best to draw up and publish financial reports are also made to companies not involved in the capital market.
The study is being produced in an ongoing dialogue with listed and mid-tier companies. This dovetailing of theory with practice also benefits those taking part in Frankfurt School’s online Certified Accounting Professional certification course. Real-world scenarios and case studies form a key part of the curriculum, serving as the basis for in-depth discussions with both tutors and fellow students. The results of the study are expected by late summer – we’ll keep you updated.
This blog post is based on Pilhofer, Jochen (2021): Externe Finanzberichterstattung in Zeiten von Corona. Empirische Analysen der DAX-Segmentunternehmen (External financial reporting in the era of coronavirus. Empirical analyses of DAX-listed companies). Published in: Sichtbar extra, a special supplement produced by the University of Applied Sciences, Saarbrücken, 2 June 2021, p. 2. Publisher: Department of Research and Knowledge Transfer.
Frankfurt School gGmbH
Adickesallee 32-34
60322 Frankfurt am Main
