Annual Report 1997/1998 - Munich Re

Munich Re Group Notes on the accounts
American Re Corporation, Princeton, acquired at the end of 1996, has
been included in the consolidated profit and loss account for the first
time.
We have not consolidated those companies in which we have
a majority of the voting rights but which are not significant
individually or together for assessing the Group’s assets, liabilities,
financial position and results. In the year under review this
involved 112 companies.
Participations in non-affiliated companies on whose business
and financial policy the parent company or any other company
consolidated in the Group accounts exercises a significant influence
are treated as associated companies and valued at equity in the
accounts. In the year under review this involved eight companies.
Consolidation methods As regards the consolidation of investment in subsidiaries, the
book value method has been used for all the subsidiaries, with the
acquisition values of the participations being eliminated against the
amount of the subsidiary’s shareholders’ funds apportionable to
members of the Group at the time of acquisition. As far as differences
resulting from the first-time consolidation are concerned, to the extent
that they do not represent hidden reserves, they are capitalized as
goodwill or offset against the revenue reserves.
The profits earned by the subsidiaries after the first consolidation –
insofar as they were not distributed – are allocated to the Group’s
revenue reserves. This item also includes the effects of consolidation
measures on profits, so that the balance sheet profit shown for the
Group corresponds to the balance sheet profit of the parent company.
For valuation of shares in associated companies at equity, the same
principles have been applied as for consolidation of investment in
subsidiaries.
Amounts relating to intercompany transactions (receivables,
liabilities, expenses and income between consolidated companies)
have generally been eliminated; the same applies to profits and losses
which result from intercompany sales and purchases of assets.
An adjustment item is included for payments made between the
balance sheet dates of the consolidated subsidiaries or the companies
valued at equity and the balance sheet date of the parent company
(consolidated balance sheet date).
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