Case 9 "Travelers" in 1998 have the question how to account their stakes of Nikko - lecture at the German Graduate School of Management and Law in Heilbronn with Prof. Dermot Williamson (Lancaster University Management School, UK)

1. Lecture 9 „Travelers“
A question of accouting in indirect stakes

2. 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

3. Facts
Revenue: 37.6 b$
Profit: 3.0 b$
Revenue: 1.5 b$
Profit: -0.4 b$ !!!

4. No.
Type of
relationship
Amount of
voting rights
Qualification
shareholders
Accouting
method
1 Control > 50% Subsidiary
Full
consolidation
2
Significant
influence
≥ 20%
Associated
company
Equity method
3
No real
influence
< 20%
Financial
investment
Fair value
(or at cost)
Accounting regulation
9,6
15,5
74,9
ord. stakes
ind. stakes
rest

5. Equity method
Nikko: Loss of 0.4 b$
Travellers (old)
Assets
Nikko 1.6 b$
Travellers (new)
Assets
Nikko 1.2 b$

6. 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

7. 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