Lecture 9 „Travelers“

A question of accouting in indirect stakes

Travelers (large US financial group)

Nikko (not listed japanese security broker )

Acquisation of 9,6% ord. shares

Purchasing of convertible bonds (exchange in shares in 2011) of 15,5 % indirect shares

1,6

billion $

Facts

Facts

Revenue: 37.6 b$

Profit: 3.0 b$

Revenue: 1.5 b$

Profit: -0.4 b$ !!!

No.Type of

relationship

Amount of voting rights

Qualification

shareholders

Accouting method

1 Control > 50% SubsidiaryFull

consolidation

2Significant influence

≥ 20%Associated company

Equity method

3No real

influence< 20%

Financial investment

Fair value (or at cost)

Accounting regulation

9,6

15,5

74,9

ord. stakes

ind. stakes

rest

Equity method

Nikko: Loss of 0.4 b$

Travellers (old)

Assets

Nikko 1.6 b$

Travellers (new)

Assets

Nikko 1.2 b$

Which accounting method should use Travelers for her different (ordinary and indirect) stakes?

How much voting rights have Traveller:

Travelers: voting rights of 25,1% SEC: just 9,6%

Questions & Discussion