Germany's financial regulator Bafin said on Monday that it has initiated a formal review of DekaBank's 2024 financial statement to investigate potential breaches of accounting rules at the asset manager.
The review focuses on tax refund claims totaling €478 million that Deka recorded as assets on its 2024 balance sheet. According to the regulator, those refund claims arise from share trading carried out around dividend record dates during the period 2013 to 2018.
Bafin noted that tax authorities have rejected the refund claims. The regulator made clear it will not adjudicate the tax disputes themselves. Instead, its scrutiny will be restricted to whether DekaBank's accounting assumptions about the likelihood of receiving the contested refunds were reasonable and in line with applicable IFRS accounting rules.
DekaBank is controlled by Germany's public-sector savings banks. Bafin reiterated that, under the regulator's rules, auditors are required to commence their own review when there is sufficient evidence suggesting possible accounting irregularities.
Responding to the announcement, DekaBank said Bafin is questioning whether the recognition of tax refund claims dating back up to a decade complies with IFRS standards. The asset manager added that it is confident its accounting choices will be found to comply with IFRS once the audit has been completed. "DekaBank is convinced that its accounting practices will be found to be in compliance with IFRS once the audit has been completed," the firm said.
The regulator's statement and the bank's response leave the immediate outcome unresolved. Bafin's review is limited to accounting treatment and does not extend to judging the tax claims themselves. The process the regulator has described indicates that any further action by auditors would follow only if evidence meets the threshold for inquiry into accounting practices.
The matter centers on entries in the 2024 balance sheet that reflect the expected recoverability of long-standing refund claims. With tax authorities having rejected those claims, the central question for Bafin is whether DekaBank's assumptions about their recoverability were sufficiently conservative and supported by appropriate evidence under IFRS.
At this stage, the regulator's review and the bank's ongoing audit process will determine whether further scrutiny, adjustments to the accounts, or other measures are warranted. Both the regulator's mandate and DekaBank's public comments indicate the issue will be addressed through established supervisory and auditing channels.
Key points
- Bafin has opened a review of DekaBank's 2024 financial statement focusing on €478 million in tax refund claims recorded as assets.
- The refund claims relate to share trading around dividend record dates between 2013 and 2018 and have been rejected by tax authorities.
- Bafin will evaluate whether DekaBank's assumptions about receiving the refunds complied with IFRS; auditors must start a review if sufficient evidence of accounting irregularities exists.
Risks and uncertainties
- Uncertainty over the recoverability of disputed tax refunds could affect the asset management and banking sectors if accounting treatments are revised.
- If auditors determine evidence of accounting irregularities is sufficient, DekaBank may face an audit review and potential adjustments to its financial statements, creating uncertainty for stakeholders.
- With tax authorities having rejected the refund claims, the contested nature of those claims adds uncertainty to the assessment of whether asset recognition was appropriate under IFRS.